IP Convergence: Beyond VoIP, Beyond Cost Savings - FCC

Taking Credit Where None is Due

Fri, 15 Feb 2008 15:49:12 +0000

With the release of ”Networked Nation: Broadband in America 2007”, the National Telecommunications and Information Administration (“NTIA”) takes credit for largely achieving President Bush’s 2004 goal of “universal, affordable broadband access for all Americans.” Not to be too cynical, but NTIA’s claim is akin to Hank Morgan’s claim that he caused the solar eclipse in Mark Twain’s A Connecticut Yankee in King Arthur’s Court.

First, the methodology by which NTIA reaches its conclusion is spurious at best. But I shouldn’t be too harsh on NTIA since they are simply following the FCC’s methods. You see, NTIA makes it claim because “broadband service was available in 99 percent of the nation’s zip codes, encompassing 99 percent of the nation’s population.” If one person in a zip code has broadband service, the FCC counts the entire zip code as having broadband access. So by this methodology it isn’t too hard to claim success.

Second, increased broadband penetration was inevitable and would have occurred regardless of public policy. Broadband penetration occurred at a rate that surpassed all previous consumer electronics. In a September 2007 survey, Pew Internet found that broadband was adopted by a majority of consumers faster than other technologies. Broadband took 10 years to break 50% adoption, followed by the CD Player at 10.5 years, the VCR at 14 years, cell phones took 15 years, color TVs took 18 years, as did the personal computer.

So was this adoption due to Administration policy or because consumers know a good thing when they see one?

Third, this Administration considers bandwidth speeds of 200 kbs to constitute “broadband.” 200 kbs may be “Rubenesque” among narrowband speeds, but it hardly counts as broadband, especially when you consider the speeds available around the world. And when you look at actual speeds that U.S. consumers enjoy, the picture is even grimmer. The Communications Workers of America (an obviously self-interested source) produced a report last year showing the median download speed in the United States is 1.9 Mbps, compared with 61 Mbps in Japan, 45 Mbps in South Korea, 21 Mbps in Finland, 18 Mbps in Sweden, and 7.6 Mbps in Canada. And of course U.S. consumers pay far more per megabit than residents in these other countries. According to the OECD, the average price per advertised Mbit/s of connectivity in the OECD is USD $18. Japan, France, Sweden, Korea and Finland have the least expensive offers per Mbit/s
o Japan: USD $0.13
o France : USD $0.33
o Sweden: USD $0.35
o Korea: USD $0.38
o Finland: USD $0.42

So what exactly is there for this Administration to take credit for? Did their policies stimulate broadband penetration, increase broadband speeds, and reduce broadband prices or like Hank Morgan are they simply taking credit for a phenomenon that was already happening over which they had no influence?

A Full Agenda

Fri, 18 Jan 2008 21:36:35 +0000

2008 holds the potential to be a landmark year for telecommunications regulation – if the FCC is willing to take action on the issues before it. A quick look shows the FCC has a lot on its plate. There are the long-standing issues of inter-carrier compensation (yes this docket was initiated in April 2001 and there is still no resolution to it) and special access reform (yes this docket was initiated in October 2002 and there is still no resolution to it either). Both of these issues take on a new urgency with the competing Petitions for Forbearance filed by Feature Group IP and Embarq regarding the application of access to charges to IP services and the coming expiration of Verizon’s merger commitments on special access. Then there are the dual petitions from Vuze and Free Press on traffic management and peer-to-peer traffic that the FCC just put out on public notice. Finally, there is the Joint Board proposal on universal service reform (an issue that has been around since the 1913 Kingsbury Commitment and was supposed to be addressed immediately following passage of the Telecommunications Act of 1996).

If the FCC wanted to, it could address all of these issues in 2008 and redefine the telecommunications landscape for the next several decades. I realize that is wishful thinking and unrealistic under the best of circumstances, but at some point someone needs to recognize that the FCC regulates an industry that generates a trillion dollars in economic activity, directly employs one million people, and is responsible for deploying and operating the infrastructure that will support so much of the future global economy. Is it too much to ask for the government to address critical policy issues impacting this industry in less than ten years? Think of the costs of inaction to the economy.

At a time when so many politicians are calling for “change”, a welcome change would be for the FCC to take the action this industry so urgently needs to move forward.

Don't grease the squeaky wheel just yet

Wed, 21 Nov 2007 23:29:35 +0000

The fallout from Comcast’s alleged traffic management practices continues with the filing of a petition by Vuze, Inc., an Internet distributor of high definition content. This petition follows on the heels of the complaint filed by a coalition of consumer groups.

The Vuze petition asks the FCC to “adopt reasonable rules that would prevent the network operators from engaging in practices that discriminate against particular Internet applications, content or technologies.” Vuze says that it does not object to “traffic management” practices, but asks the FCC to ensure that such practices meet the following conditions –

1. The network operators’ network management practices should be based on actual impact on the network, rather than targeting or disproportionately impacting specific services or technologies;

2. Network management practices should be transparent and publicly disclosed, providing consumers, content providers, applications developers, and service
providers greater certainty that their preferred technology and services are acceptable and not subject to interference on broadband networks; and

3. Network management practices should not used as a pretext for discriminating against particular types of content or services that the network operators may view as unacceptable or potential sources of competition.

While I certainly can appreciate Vuze’s interest in establishing such rules, I again have to ask, as I have throughout this entire “net neutrality” debate, why otherwise entrepreneurial people would run to the government for help with what is essentially a problem in their distribution chain? Who is advising these companies to seek redress before the FCC and why are they being listened to? Even a cursory review of the FCC’s record would show that they are a terrible forum for these types of disputes.

More broadly, why is everyone trying to invite the FCC to regulate the Internet? Has the FCC done such a great job regulating telecommunications, cable, and broadcasting that we want them now to regulate the Internet? Think through what jurisdiction over the Internet could encompass. Network operators, ISPs, content providers, equipment manufacturers, software developers, hardware manufacturers, service providers, the list is endless. By the time all is said and done, the FCC would have jurisdiction over an enormous segment of the economy. Is this what we want? If ever there was a sure way to retard our technological progress and innovation, this is it. I said it before and I will say it again, the cure (FCC regulation) in this case is likely far worse than the disease (alleged discrimination).

Parties should try working these issues out amongst themselves before asking the FCC to get involved. No where in Vuze’s petition do they say that they tried to work it out directly with Comcast. Perhaps if they did, they would find a mutually beneficial solution. Perhaps not. But that doesn’t mean “there ought to be a rule.” As I said the other day, there are a host of relationships that need to reach equilibrium before the Internet matures. It would be a shame to freeze some of these relationships in place just to grease the squeaky wheel.

Google's Mobile Phone Alliance

Mon, 05 Nov 2007 20:15:41 +0000

A number of bloggers have been blogging about on Google's mobile plans for the better part of the year.

Recently I blogged as to how Google may be able to take their may ad revenue business model into the mobile space.

Well today, Google made it very clear with their mobile alliance announcements .

The interesting part of the discussion revolves around Verizon. Specifically, Verizon may be in talks with google in joining Sprint and T-Mobile as part of Google's plans.

But is this the same Verizon that sued the FCC after the FCC adopted Google's open access motions?

Yes it is the same Verizon.

It may be that Verizon needs to be involved and not get blindsided as they did when they choose not to support Apple's iPhone, and lost a tremendous branding opportunity.

Or, it may be that Verizon needs to be involved to make sure it's part of the disruption as mobile business models change.

Another score for the open source business model and for the public as we should see innovation at as faster velocity.

Time will tell!

Give Google a Break

Mon, 01 Oct 2007 16:26:02 +0000

This weekend I read a commentary by PC Magazine’s editor and Chief Lance Ulanoff “Don’t Give Google 700Mhz”

I posted a response at their website and I am still bothered by the position he has taken.

“ The position that 700Mhz digital data services may require antennas as broadcast analog TV is totally off base. An analog broadcast != (not equal to) digital data, broadcast TV is just that a broadcast signal without any protocol between the receiver and transmitter, whereas digital data receiver and transmitter have defined protocols that optimize reception given the available data rate e.g. WiFi, GPRS etc …
Some of the biggest advantages of wireless digital data at 700Mhz is not needing line of site , not prone to moisture (water in leaves) and a huge chunk of to be available spectrum.
The position that Verizon, Sprint and ATT know the business and can do better for the American public is weak at best.
“The Federal Communications Commission (FCC) is an independent United States government agency, directly responsible to Congress. The FCC was established by the Communications Act of 1934 and is charged with regulating interstate and international communications by radio, television, wire, satellite and cable. The FCC's jurisdiction covers the 50 states, the District of Columbia, and U.S. possessions.”
The FCC’s job is to manage American spectrum for the country , e.g. the people.
When was the last time Verizon, Sprint and ATT acted on behalf of the people? Checkout your Verizon RZAR and you’ll find out they feature lock Motorola’s features (like local access to Bluetooth to transfer files), whereas T-mobile does not.
Google is acting to further itself , but there’s a difference here. Google’s advocacy on Open Access to Spectrum is disruptive and will create innovation in the wireless industry that will benefit the people.
Google’s greatest strength is their success, their greatest challenge is maturing as a regulatory influencer against the incumbents who have decades of experience on playing the game.”

I had to rewrite the post several times just to get my emotions out.

Google has and will change the wireless industry. The position they have taken on open access on spectrum will create innovate environment , which will open the markets to more companies that develop hardware, software or services (content).

The big three will need to be competitive to protect their base, this is no different than the FCC open market position in the 90’s that opened local markets which benefited users with more choices and lowered costs.

The Sun Sets on Long Distance

Wed, 05 Sep 2007 20:14:36 +0000

On August 30, 2007, the FCC moved to sunset the requirement for AT&T, Verizon, and Qwest to provide long distance services through a separate affiliate. In issuing its decision, the FCC touted the benefits to the companies and the additional consumer protections agreed to by the companies.
Unfortunately, the FCC failed to take the necessary parallel action which would have made this a truly meaningful milestone for more than just those three carriers. Finding that AT&T, Verizon and Qwest are non-dominant in the long distance market was only half the story. The FCC should have gone further and concluded that distance is irrelevant for purposes of inter-carrier compensation and that rates for termination of traffic therefore must be uniform, regardless of the originating point of the traffic. Failing to take this step leaves a critical gap in the FCC’s policy and provides AT&T, Verizon and Qwest with a cost advantage in what remains of the long-distance market. Unaffiliated carriers still have to pay AT&T, Verizon and Qwest access charges for the termination of long distance traffic. And while AT&T, Verizon and Qwest still have to pay those charges as well, historically the majority of long distance traffic originates and terminates in-region for each of these carriers so they are simply paying themselves for the majority of the traffic. Not so with unaffiliated carriers and thus the problem. Unaffiliated carriers continue to be handicapped by artificial access charges while AT&T, Verizon and Qwest are not. Unless the FCC remedies this problem, the sun will surely set on the competitive long distance market sooner rather than later.

Forbear and Forget

Thu, 09 Aug 2007 11:00:49 +0000

Every now and again government takes some action that really brings out the skeptic in you. At the Federal Communications Commission, one example of this was its handling of Verizon’s “forbearance” petition. Filed at the end of 2004, Verizon asked the FCC to forbear from applying traditional common carrier regulations to its “broadband” services. It was such a sweeping request because “broadband” was left undefined and applied to a huge range of Verizon’s services, both residential and commercial.

So what did the FCC do with Verizon’s petition? As any good government agency would do when faced with such a critical decision, they ducked. The FCC let the statutory deadline for action pass without taking any action which meant that Verizon’s petition would be deemed granted. Rather than proactively address the conditions under which it would forbear from regulation, the FCC instead did nothing. Basically, when it came time for the FCC to put its money where it mouth is when it comes to deregulation, they didn’t have the intellectual capacity to justify their approach to regulation. I mean if ever there was an opportunity to explain their governing philosophy, this was it.

Thankfully, some CLECs are trying to force the FCC’s hand and make them issue a written order either denying the Verizon petition or explaining what it is they did approve. The FCC is accepting comments on the CLEC petition until August 13th. If for no other reason, parties should urge the FCC to issue a written order so that the FCC can explain its approach to regulation, or deregulation as the case may be. I think the industry would be well served by a clear statement of FCC policy in this regard. It certainly is preferable to the FCC’s current approach which appears to be “forbear and forget”.

Ready for a scary thing? Deep Packet Inspection!

Thu, 02 Aug 2007 18:57:49 +0000

According to Wikipedia Deep Packet Inspection is “a form of computer network packet filtering that examines the data part of a through-passing packet, searching for non-protocol compliance or predefined criteria to decide if the packet can pass. This is in contrast to shallow packet inspection (usually called just packet inspection) which just checks the header portion of a packet.”

First off, this is a very real technology. A quick search via google brought the company Bivio Networks to my attention. (* Disclaimer: I have no interest, financial or otherwise with this company.) Bivio’s 7000 series claims that
“when fully configured, the 7000's application processing subsystem offers 45,000 MIPS -- enough to run "any IP network service" at wire speeds up to 10Gbps -- including IDS/IDP, firewalling, VPN, network surveillance, lawful interception, and application traffic management. Developers can use any of the standard Linux components (such as iptables) as part of their deep packet processing applications.

Now let’s look at some of the implications of DPI. A very interesting article on here from ars technica puts things in an interesting light:

“Imagine a device that sits inline in a major ISP's network and can throttle P2P traffic at differing levels depending on the time of day. Imagine a device that allows one user access only to e-mail and the Web while allowing a higher-paying user to use VoIP and BitTorrent. Imagine a device that protects against distributed denial of service (DDoS) attacks, scans for viruses passing across the network, and siphons off requested traffic for law enforcement analysis. Imagine all of this being done in real time, for 900,000 simultaneous users, and you get a sense of the power of deep packet inspection (DPI) network appliances.
Although the technology isn't yet common knowledge among consumers, DPI already gives network neutrality backers nightmares and enables American ISPs to comply with CALEA (government-ordered Internet wiretaps) reporting requirements. It also just might save the Internet (depending on who you believe). “
The power of this technology is simply awesome, and the impacts it can have are serious. The current state of government mandated network monitoring forces some network operators to consider implementing this. One word jumps to my mind, and that’s SCARY – and I am not referring to my driver’s license picture either!

By the way, did I mention that the above Bivio 7000 is listed at $10,000!

Post Hoc Ergo Propter Hoc

Tue, 31 Jul 2007 23:21:48 +0000

The release by the Progress and Freedom Foundation of Scott Wallsten’s paper Has Deregulation Affected Investment in Special Access?” is a feeble attempt to suggest a benefit from price deregulation for special access services where there is none. The gist of the report is that investment in special access facilities increased in areas where incumbent carriers were granted pricing flexibility under the FCC’s Pricing Flexibility rules. Mr. Wallsten’s key conclusion is –

“I find that the share of a state’s population living in regions that have been given
Phase 1 or Phase 2 pricing flexibility for dedicated transport / special access is
positively and significantly correlated with the number of special access lines. The result suggests that granting pricing flexibility is associated with increased investment in special access facilities by the ILECs. The share of a state’s population living in regions that have been given Phase 1 pricing flexibility in channel termination is positively correlated with the number of special access lines, but at just less than conventional levels of statistical significance. The share of the population living in regions with Phase 2 pricing flexibility in channel termination does not appear to be correlated with ILEC investment in special access.”

Of course this conclusion is preceded by two pages of caveats indicating that the analysis lacked relevant information from a number of sources. What I find most hilarious about it though is the simplicity of the conclusion and the complete disregard for the fact that the number of special access lines in Phase 1 and Phase 2 pricing flexibility territories has increased simply because demand has increased. If ever there was an example of “post hoc ergo propter hoc” this is it.

Papers like these are harmful to the debate surrounding special access services. Special access pricing is a very real problem in the industry. Virtually every carrier relies on special access for the delivery of their services to consumers. High special access prices leads to high consumer prices. The FCC is poised to act on this critical issue. Let’s hope they finally get it right.

SunRocket and the Future of Competition

Wed, 18 Jul 2007 03:15:28 +0000

Today’s reports about SunRocket ceasing operations should serve as a wake-up call to policy makers. After two plus decades of effort, policy makers are anxious to declare victory and call the telecommunications market “competitive”. Unfortunately, reality keeps intruding on their vision as the Sunrocket situation demonstrates.

The fact that the number two provider of VoIP services in the country would just cease operations without any liquidation or bankruptcy suggests there just wasn’t much salvage value to the operation. So when incumbent operators point to VoIP as the great competitive threat, policy makers should keep SunRocket in mind.

“Competition” will remain as fleeting as SunRocket for several reasons. First, as Vonage continues to demonstrate, marketing costs are almost insurmountable for new entrants seeking to serve the mass consumer market. This is why cable companies are the greatest hope for residential competition. Their marketing costs are significantly less due to their existing customer relationships, billing infrastructure, and low-cost access to commercial air time on their own systems.

Second, as the FCC’s response to Verizon’s petition to improve access to multiple dwelling units shows, even the largest carriers need the government’s help in overcoming monopoly power. But as the city of Philadelphia’s deal with Earthlink shows, breaking the monopoly on rights of way can greatly facilitate competition. Unfortunately, most municipalities continue to make access to rights of way difficult and landlords and building owners continue to leverage their monopoly to the detriment of competitive carriers. But this is an area again where cable companies have an advantage over other competitors because of their unbiquitous access to rights of way through the franchise process.

Third, until the FCC addresses the three core problems plaguing the industry – inter-carrier compensation, universal service, and special access regulation – competitors will remain handicapped in their ability to effectively compete. Under today’s regulations, as much as 70% of a competitor’s revenues go right out the door in the form of last mile access. Another 10% goes to the FCC for universal service. So, competitors today must be able to attain profitability on as little as 20% of their revenues. Not too many companies can do that.

Fourth, the notion that VoIP as offered by cable companies will provide the competitive alternative to incumbent operators is superficially appealing, but closer examination shows that the competition is limited at best. Atlantic ACM is predicting cable companies will have 23 million VoIP subscribers by 2012. While that number is large, relative to AT&T and Verizon, it’s pretty small. Verizon has some 130 million access lines, 60.7 million wireless subscribers, over 7 million broadband customers including over 1 million FiOS customers, and over $20 billion in revenue from its business unit, the former MCI. AT&T has similarly staggering numbers.

So the fact that all cable companies combined will have 23 million VoIP subscribers in five years is pretty unimpressive. Moreover, with no presence in the business market, no wireless service of their own, and no Internet backbone, cable companies are only targeting a narrow segment of the overall telecommunications market and clearly lack the economies of scope and scale that AT&T and Verrizon enjoy. In the long run, that favors AT&T and Verizon.

Unfortunately, the SunRocket situation is going to lead not to a re-examination of core telecommunications policy, but instead more regulation of VoIP providers. I suspect the FCC is going to impose an additional layer of compliance regulation on VoIP providers to address market exit. Of course, the FCC still won’t address market entry requirements for VoIP providers.

And that is the sad truth about telecommunications policy in the United States. There is no political base for pro-competition policies. In the 1980s and 1990s, business customers were able to convince lawmakers that the local telephony market had to be opened up. Twenty years later, policy makers think they have succeeded and are now focused on the mass consumer market. VoIP and cable companies were the answer, but as SunRocket demonstrates, it may not be a lasting answer.

The Truth About Special Access

Tue, 12 Jun 2007 00:12:27 +0000

The release by the Free State Foundation of Randolph May’s white paper on special access compels me to address some common misperceptions and misunderstandings about the special access market that need to be corrected.

Rather than go point for point, I think it is best to address more broadly the misperceptions that Mr. May repeats in his paper.

As an initial matter, Mr. May buys into the Federal Communications Commission’s (“FCC’s”) methodology for granting “Phase I” and “Phase II” pricing flexibility for special access services. AT&T (pre-SBC merger) pretty well debunked this in their Petition for Declaratory Ruling back in 2002. Special access competition requires a building-by-building analysis. You either have competitive facilities in your building or you don’t. It doesn’t matter if the building next door has competitive facilities. And given the difficulty and expense of deploying facilities to a building, the notion that a carrier can deploy its own facility in response to customer demand is farcical. Customers demand service within 2-4 weeks. It takes a minimum of 8 weeks and sometimes as long as 18 months to deploy facilities and most of this time is taken up trying to obtain the necessary municipal rights of way. More over, landlords and building owners often prevent competitive carriers from entering their premises unless the carrier is willing to pay additional costs. Verizon experienced this problem on the video side of their business with multi-tenant buildings and got the FCC to initiate action. So unless you already have facilities in a building, you are pretty much unable to compete for new business.

Mr. May also assumes that because special access services are high capacity services, they are subject to greater levels of competition. While this may have been true in the past, technology has advanced to the point where competition for low capacity services is now at least if not more economical. With the advent of VoIP, the greatest competitive activity now lies in the residential and small business market, not in the large business market where the majority of special access services are sold.

Mr. May also assumes that new entrants and new technologies will serve the special access market and deliver it from its monopoly grip. But Mr. May fails to realize that large business customers do not have confidence in new entrants or new technologies, particularly wireless technologies. When compared to fiber, these new technologies just don’t stack up. And as the old saying goes, “no one ever got fired for using AT&T.” I challenge you to find a telecommunications manager that is going to purchase mission critical telecommunications services from an unknown start-up using an untested technology.

I will agree with Mr. May that more regulation is not the answer. The Bell Companies are too good at manipulating the process and the competitive industry does not have the resources to participate in a proper rate-making process. That is why Global Crossing has been pushing for the right to request commercial, baseball-style or final offer arbitration in order to facilitate the negotiation of special access arrangements and improve upon the non-negotiable terms and conditions presented by the incumbent operators. Global Crossing strongly believes an arbitration procedure would relieve the FCC of the burden of addressing these inter-carrier contract disputes, would shine the light of commercial reasonableness on incumbent practices with regards to special access services, and would serve as an effective remedy to the increased market power in the special access market that has resulted from recent consolidations and bankruptices.

Moreover, final offer arbitration will facilitate interconnection negotiations for advanced IP and Ethernet-based services which are increasingly being utilized as substitutes for special access services. Because it is a much more rapid and efficient means of dispute resolution than current FCC processes, final offer arbitration can help accelerate the deployment of advanced broadband infrastructure by dramatically reducing the amount of time and resources parties spend on dispute resolution, which some parties estimate is greater than what carriers spend on research and development.

Incumbent carrier’s share of the special access market typically is greater than 80% throughout their service territory. Virtually every carrier in the industry relies on special access services to deliver services to end-user customers. Thus, unreasonable terms and conditions for special access services cause direct consumer harm as the price and quality of finished end-user products and services are dependant on the price and quality of special access services inputs.

In 1999 the Commission initiated a process that has led to the continued deregulation of special access services. At the time it adopted its Pricing Flexibility Order, the FCC rightly believed that the investment boom in telecommunications would result in robust competition for special access services. However, the telecom bust and subsequent spate of bankruptcies and consolidations have reversed the early progress of competitive forces, resulting in a market for special access services that is largely dominated by the incumbent carriers. In light of this unforeseen consolidation and lack of competitive alternatives, a final offer arbitration procedure is an effective measure to address both price and non-price disputes and is consistent with the FCC’s underlying goal of continued deregulation of special access services.

...and more to come

Fri, 01 Jun 2007 17:48:29 +0000

Note this comment from FCC Chairman Martin with regards to future VoIP regulation –

“Although today’s item does not address all of the remaining policy goals, it is a critically important step. We continue to evaluate the remaining obligations including: numbering (access to numbering resources, number portability obligations, and numbering support obligations) and consumer protection issues (service discontinuance notifications, slamming, and billing issues, etc). I hope that by addressing these obligations, the Commission will be able to continue to protect the interests of consumers and establish a competitively neutral playing field for competing services.”

Curiously, there is no mention of any efforts to provide VoIP providers with the rights that typically attend these obligations.

More VoIP Regulation

Fri, 25 May 2007 15:32:23 +0000

On the FCC’s May 31st meeting agenda “the Commission will consider a Report and Order regarding revisions to its disability access rules under section 255 and to its Telecommunications Relay Services rules under section 225 of the Communications Act of 1934 to interconnected Voice over Internet Protocol providers.”

And so the FCC continues to impose yet more responsibilities on VoIP providers without addressing the rights of VoIP providers.

Pumping up the Pressure

Fri, 11 May 2007 17:09:37 +0000

I have been watching the debate over the alleged “call pumping” by rural phone companies with a mixture of amusement and disgust For those unfamiliar with it, a number of rural telephone companies in Iowa have figured out that they can host conference calling and chat line services to generate a great deal of inbound traffic to their network. At the same time, these rural phone companies have a very expensive, government sanctioned, toll booth set up so that other carriers (including Global Crossing) who deliver these calls get hit with a hefty per-minute charge (between $0.05 and $0.10 cents per minute).   Initially some carriers attempted to block traffic to these Iowa companies, but when the Iowa companies complained to the Federal Communications Commission (“FCC”) the blocking stopped. So now several carriers are filing suit in an attempt at relief.

The reason I find such amusement in the situation is that it is a replay of the situation in the 1990s when CLECs discovered they could serve dial-up ISPs to generate enormous amounts of inbound traffic and beat the Bell Companies at their own game of access charges. Eventually, the Bell Companies launched a full court press against the CLECs and convinced the FCC to treat “ISP-bound” traffic differently, thus providing relief to the Bell Companies at the expense of the CLEC industry. One should consider how much faster the Bell Companies would have rolled out broadband services if the FCC refused to provide relief and the Bell Companies had to figure out for themselves how to respond to the CLECs in the market. Wouldn’t the proper competitive response to the situation been to (a) serve ISPs better than CLECs or (b) build a better mousetrap (broadband) to reduce demand for dial-up Internet service? So by bailing the Bell Companies out, the FCC likely slowed the roll out of broadband services.

But I digress. My amusement this time around stems from the fact that the Bell Companies are once again being hoisted by their own petards (access charges) only this time instead of an under-funded, politically weak opponent, they face a very politically formidable adversary in the form of rural phone companies.   Relief at the FCC will not be so easy this time.

But i am also disgusted by this because there are broader issues at stake in this debate and I am afraid the FCC will once again pass on the opportunity to finally address them. The most obvious issue of course is inter-carrier compensation. The rationale behind allowing rural telcos to charge such high access charges in the first place – a subsidy for universal service which itself was supposed to have been eliminated by the Telecommunications Act of 1996 – doesn’t hold up in the context of this situation. The rural telco’s access rates were based on low volumes of inbound traffic. Increases in that traffic by thousands of percentage points should be accompanied by corresponding decreases in their access charges. The fact that these rural telcos are able to unjustly enrich themselves through the manipulation of a broken system reminds me of some of Enron’s practices in the energy market. And the hypocrisy of these companies running this scheme should not be lost on an industry that has had to endure repeated entreaties by rural companies whining about “arbitrage”.

But in a funny way, these rural telcos may have hit upon a new way of funding universal service. What if instead of allowing them to charge such high access rates, we instead made them mandatory host for chat lines or other dial-up services? What they would lose in high access rates they would more than make up for in volume. I wouldn’t be surprised if non-rural telcos would be happy to forfeit these customers in exchange for some rationalization of the inter-carrier compensation regime.

But again I digress. Telecommunications services are increasingly becoming location agnostic and the transition to IP is only accelerating this trend. If the FCC continues to require carriers to pay usurious rates to rural telcos in the name of universal service, then rural telcos are going to have an unfair, government sanctioned advantage over all other carriers. Carriers opposed to the Iowa telcos’ alleged call pumping scheme claim the Iowa telcos are sharing the access revenues with the conference call and chat line service companies. At $0.05 to $0.10 per minute, rural telcos can easily afford to do that. The rest of us – who can only charge on average $0.005 to $0.001 per minute for access – can’t sweeten the pot like the rural telcos can.

Of course, none of this is new. Although business cases that are predicated solely upon the kickback of access charge revenue actually is taking arbitrage to previously unseen levels. In the case of ISPs and CLECs, ISPs had legitimate subscription services for which they were generating revenue independent of the inter-carrier compensation arrangements. The dial-up services at issue here are “free” for end users, so the “service provider” is not generating revenue independent of the inter-carrier compensation arrangements. Indeed, it appears that the only revenue derived from the “service” is the kickback of access revenue from the Iowa telcos. If this is the game the Iowa telcos want to play, reduce their access charges to the same level as everyone else and let them compete for this business on an equal footing.

Unfortunately, the FCC probably lacks the courage to do anything meaningful about it.   They have had an open docket on this topic since 2001! Even the Missoula Plan, which is supported by the majority of rural carriers, is stalled at the FCC. Normally, a dispute between two powerful lobbies more often than not further paralyzes the FCC, but given the amounts of money being transferred to the rural companies, one can hope the FCC wakes up to the urgency of the overall situation and takes long-overdue action.

The Politics of VoIP in Developing Nations

Thu, 03 May 2007 13:29:55 +0000

The Politics of VoIP in Developing Nations

Recently I had an opportunity to meet with a native of Malawi. The meeting came about due to a group of visiting “ambassadors” from Africa. One of the participants was a gentleman by the name of Frank Mvalo. Per his bio:

Frank Mvalo from Malawiworks in the private sector in management and IT systems as a management consultant. During the exchange, Franks wants to learn more on strategic management and business planning, monitoring tools for the field of development, and the management of IT development projects. Frank speaks 3 languages and is married with one child. (http://www.rotary7120.org/GSETeams.cfm)

He requested a series of meetings with folks while in the US that are in the IT and Telecommunications field. The visit was organized by the Group Study Exchange (GSE) program of the Rotary Foundation. While I am not a Rotarian, I know a number of people that are. They reached out to me, and earlier this week I sat down with Frank for lunch to discuss telecommunications technologies like VoIP, and it’s potential applicability in developing nations like Malawi. The conversation quickly moved away from the technology to regulations. I learned in areas of the world where the impacts of technological advances could have the greatest impact, prohibitive regulations by corrupt governments in these developing nations prove to be the biggest stumbling block.

Later that evening, as a result of this eye-opening discussion, I decided to learn more. I performed a simple google search with the key-words “voip in third world countries” – and of the 1million plus hits, result number 1 and 3 are titled:

1) » Third World VoIP blocking has the stench of corruption 2) Techdirt: Put Down The VoIP Phone, And Come Out With Your Hands Up

From the first article:

“Namibia is the latest nation to go absolutely convulsive over the prospect of some of its citizens bypassing the local phone monopoly by selling and using VoIP. Five people have been busted.”

At a time when the digital divide widens between the haves and have nots, it’s sad to see that technical innovation is stifled at times when bridge building across the divide needs to take place. Should you read more, you will see that it’s not just policies of the third world nations, but also restrictions of financial backers. Frankly, the whole thing reeks of corruption.

Adam "voiploser" Uzelac