The Legal Underpinnings Of The IP Transition

Fiber is replacing the old, copper-based telephone network. However, legal frameworks have not been fully updated to address the changing technology.

Our telecommunications networks are only part way through the transition from traditional “time-division multiplexing” (“TDM”) to “Internet Protocol” (“IP) based digital technology. In some industries, technological transition is relatively easy; as new technology develops, the economy assimilates it. However, when it comes to telecommunications, the transition of our traditional networks, originally deployed for voice telephony, is fraught with complicated regulatory and legal questions.

The Benton Foundation’s Kevin Taglang has written a magnificient overview of the policy and technological challenges of what is referred to as the “IP Transition.” Benton has also published a report which identifies ten important principles that must be maintained during the transition:

  1. Ubiquity: Every American needs to have affordable access to high-speed fixed and mobile broadband networks.
  2. Accessibility: The 54 million Americans with disabilities and other vulnerable populations must be able to make full use of broadband networks and the video, voice and data services that run over these networks.
  3. Diversity: In addition to ubiquitous availability, Americans must have the ability to access and distribute content that reflects the country’s diversity of viewpoints.
  4. Openness: Consumers must retain their rights to utilize any legal applications, content, devices, and services of their choosing on the broadband networks they use.
  5. Competition: Policies should encourage new entrants into the emerging IP-enabled network market.
  6. Interconnection: Regulators must ensure that competing network providers are able to interconnect in areas where there is legacy market power. Subscribers must be able to reach subscribers on any other network.
  7. Trustworthiness: As technology moves forward, consumers must retain key protections that ensure a fair and safe experience.
  8. Robustness and resiliency: To ensure public safety, consumers need to be able to rely on networks in emergencies.
  9. Speed: Consumers need fast networks that allow them access to, and choice of, a full range of services to meet their needs.
  10. Innovation: For consumers, the promise of the IP transition is new services and ways to collaborate and communicate that are better and more advanced than current basic telephone communications.

Public Knowledge has also addressed these issues from a public interest perspective.

Technology does not wait. No one disagrees that a transition is well along in which the old copper-based telecommunications network will be largely replaced over time, with fiber, and that the old technologies originally designed for the copper network will also be supplanted. However, legal frameworks have not been fully updated to address the changing technology. The challenge is to maintain the protections that have been established in regulating the traditional networks.

This is not the first time, and certainly not the last, when engineers and technologists have moved far more quickly than the law. For all the criticism, the regulatory scheme first adopted in the Communications Act of 1934 and slightly updated in the Telecommunications Act of 1996, has proven to be remarkably flexible and durable. The basic statutory framework did not contain terms such as “microwave” and “cable television,” yet the FCC was able to fashion rules addressing these technologies before Congress put them into the law. However, this sometimes involves “round peg/square hole” dilemmas that have required the Commission to stretch and massage the statute to achieve its goals.

For more than a hundred years, our telephone network has used the “circuit switched” framework developed by Alexander Graham Bell. A party seeking to contact another provides a number, first to a switchboard operator, later by dialing, and even later using tones. A dedicated connection (originally metallic, but later sometimes partially by microwave) is made across town, across the country or internationally. Connections are made from one switching office to another, sometimes through a dozen or more switching offices, all the way to the individual being called.

The U.S telephone system remains the envy of the world. Despite its complexity, it is stunningly efficient, even in difficult weather and at times of high usage. The goal, which has consistently been met and exceeded, is “five nines” reliability, i.e., 99.999% of the time the system is operable. This is so invisible to us that it is easy to take it for granted.

Digital transmission is not new; Morse code telegraphy pre-dates the telephone. However, as computers came into use in the 1950's and 1960's and the need arose to transmit large (for the times) amounts of data, circuit switched transmissions, even over specially dedicated lines, were not up to the task. This led to the introduction of packet-switched networks. Instead of creating a dedicated route for the entire contents of each call, packet switching essentially leaves the network unchanged, but sends many small pieces of the message’s data separately to a destination. A “header” containing the ultimate address and other information is attached to each tiny piece of the message. Along the way, each individual packet takes a different route, but is reassembled, and the headers removed, at a “node” near the destination.

At first, circuit switching carried only voice and a relatively small amount of data (digitized with modems), and packet switching carried only data. Moreover, as the Internet developed, the technological standards called “Internet Protocol” became ubiquitously available. (This can be confusing; you don’t need to use the Internet to use IP.) Ultimately, it became easy, and as anyone using Skype will know, extremely cheap, to digitize voice.

All this has created a dilemma for phone companies, and for the FCC. The carriers have invested billions of dollars creating and maintaining an increasingly obsolete circuit switched voice network. They long ago stopped building new switched network capacity, and have instead invested in developing IP networks. From a business perspective, they have every reason to convert their networks to IP and to retire their circuit-switched technology as soon as they can. However, the conversion of these networks, what is referred to as the “IP transition,” may eliminate important protection for competitors and the public.

The FCC’s numerous and sometimes inconsistent decisions have created a regulatory minefield.

Even before the advent of IP, in addressing digital technologies, the FCC determined to take a cautious position, lest it stifle innovation. In a long series of ad hoc decisions, it developed a policy that left “enhanced services” less regulated or unregulated. (Oversimplifying, an enhanced service does something besides merely pass on a call to its destination. For example, voicemail is an enhanced service.) However, the Commission’s numerous and sometimes inconsistent decisions have created a regulatory minefield.

Under a complex system of laws and regulation, traditional phone companies must provide 911, protect consumer privacy, disability access, and make universal service contributions. They are required to interconnect their customers to other carriers and make their service available to everyone, and they are subject to consumer protection rules. And, no less importantly, they are expected to make sure that the system works when it is needed. These rules rely on the fact that they are provided on the public, switched telephone network (“PTSN”).

As the carriers began to modify their networks to employ IP technology, it has become apparent that the protections consumers have come to rely upon may not be automatically available to them in the cell phones and IP-based networks that are replacing the old copper network. Callers using some IP-based systems have not been able to reach people in rural areas. Unlike the traditional network, wireless and IP-based networks such as Verizon’s FiOS are not self-powered; emergency battery back up systems only work for hours, not days. These shortcomings came into focus in the wake of Hurricane Sandy when Verizon attempted quietly to obtain FCC approval to replace damaged copper lines in some beach towns on Fire Island (NY) and elsewhere with a wireless service called “Voice Link.” Voice Link does not provide the same voice quality as regular phone systems, and does not accommodate fax machines, burglar alarms, credit card machines and medical alert systems. Users may not receive collect calls. While the FCC blew the whistle on Verizon’s plans, the incident exposed the regulatory challenge ahead.

The Fire Island controversy highlighted an important element of the Communications Act. This is one element of the transition process where the legal authority is clear. Section 214 of the Act provides that a telecommunications carrier must get permission of the FCC to deploy a service. While historically it was less important, Section 214 also requires that:

No carrier shall discontinue, reduce, or impair service to a community, or part of a community, unless and until there shall first have been obtained from the Commission a certificate that neither the present nor future public convenience and necessity will be adversely affected thereby;...

The FCC has set out to define how it will employ its Section 214 discontinuance powers by inviting carriers to file applications for “experiments” in which it will oversee retirement of copper-based systems in a number of communities. In the process, it intends to define minimum standards for insuring backup power, emergency service and other consumer protections. However, these experiments do not completely address what regulatory power the FCC will be able to use to insure these requirements.

There are many other unanswered questions.

There are many other unanswered questions. Consider the regulation of “voice over Internet Protocol” (VoIP). There are two flavors. “Interconnected VoIP,” uses IP over traditional phone networks, with a traditional phone number. (Vonage is an example.) Non-interconnected VoIP, like Skype, is directly connected to the Internet through a computer. Because interconnected VoIP uses the traditional phone network, it is subject to direct FCC regulation. However, in 2004, the FCC preempted the Minnesota Utilities Commission from applying local phone regulation to Vonage’s interconnected VoIP service, and has since preempted other states from regulating VoIP. But the FCC declined to classify Vonage’s service as either a lightly regulated “information service” under Title I of the Communications Act or a more regulated “telecommunications service” under the more highly prescriptive Title II of the Act. More or less contemporaneously, the Commission ruled that AT&T’s traditional copper service that included a VoIP component in the middle of a transmission was a Title II service. And interconnected VoIP provided by cable companies remained unclassified.

Thus, although interconnected VoIP, which is connected to the TDM-based PTSN, is not subject to Title II and is thus largely unregulated. Even so, the FCC has applied some rules to interconnected VoIP using a portion of Title I as well as its “ancillary authority.” Ancillary authority, which is subject to criticism from many quarters, allows regulation over otherwise unregulated services if the regulation is needed to promote a regulated service. The use of ancillary authority is based on the existence of the PTSN. It is unclear what happens if the PTSN element (i.e., the traditional copper network) ceases to operate.

The challenge is to maintain the protections that have been established in regulating the traditional networks.

The IP transition has many controversial aspects. For example, recently, over two dissents, the FCC issued a Declaratory Ruling relating to how to interpret the so-called “VoIP symmetry” rule contained in a 2011 decision involving the Universal Service Fund and Intercarrier Compensation. The details aren’t relevant here, but what matters is that the FCC ruled that a local phone company can collect a particular kind of charge (an “end office switching charge”) when its VoIP partner transmits calls to an unaffiliated ISP to be routed over the Internet. The Commission’s decision turned on the fact that the VoIP connection “is functionally equivalent” to a switched connection. However, as FCC Commissioner Ajit Pai noted in his dissent, the Commission ruling allowed a charge to be imposed even though there is really no “end office” involved in a VoIP connection.

The Declaratory Ruling attempted to resolve one small dispute arising from the IP transition. There will be many, many more in the years to come.

By Andrew Jay Schwartzman.