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“IP” Does Not Mean “Fiber,” “Fiber” Does Not Mean “IP” — Clearing Confusion About the Phone Network

February 4, 2013 , , , ,

As regular readers know, I regard the upgrade of the phone
system (aka the “public switched telephone network” or
“PSTN”) to an all-IP based network as
a majorly huge deal
. As I’ve explained at
length before
, this is a huge deal because of a bunch of decisions the
Federal Communications Commission (FCC) has made over the years that have
fragmented our various policies and regulations about phones into a crazy-quilt
of different rules tied sometimes to the technology (IP v. traditional phone (TDM))
and sometimes to the actual medium of transmission (copper v. fiber v. cable v.
wireless). This whacky set of FCC decisions has produced a great deal of
confusion about what we are talking about when we talk about the upgrade of the
phone network.

 As a result, people keep pointing out the same two things
to me over and over and over. “AT&T
is not switching to fiber to the home! Their upgrade is still copper
!” The
other is: “Verizon
is pulling up all their copper in New York City
 (and everywhere else
in the Sandy zone) and shifting customers from copper to FIOS without getting
any permission from anyone!” These observations are usually made with the same
fervor as Charlton Heston
giving out his recipe for Soylent Green
.

Allow me to debunk the Cult of the Copper Snake (with bonus
points for recognizing the Biblical reference. And no, it isn’t the Golden
Calf. It’s the Copper Snake.) You can have an all IP network that runs on
copper, and you can run a traditional TDM-based network over fiber that is
treated like a phone service. Both of these are different from a TDM-system
that runs on copper.  All three are treated differently from each other
from a regulatory perspective. I also must point out, in AT&T’s defense,
that AT&T never claimed it was upgrading to fiber, and in fact has been
quite specific that they are not going FttH (to Wall St.’s great relief
and the disappointment of many others paying attention).

If you want to stop here, you can. If you want to find out why
this is true, and why people keep confusing them, then you must continue on,
delving into the minutiae of the last ten years of regulatory history. While a
pain in the patootie to sort through (and I will do what I can to make it less
boring where possible), it’s worth it if you want to understand what’s going on
and how AT&T can be going on about how this is going to improve broadband
and blah blah blah without ever promising to move to fiber to the home.

 

The Difference Between Fiber and Copper: The
2003 Trienniel Review Order

 Lets start with the cut between fiber and copper. Back at
the Dawn of the Millenium, when we had 6,000 independent wireline ISPs and
telephone companies like Verizon supported “open access” for cable, Republicans
took over the FCC. They had a very different philosophy than the Democrats, who
believed that we should have competition by requiring telecom providers to
share essential facilities. Republicans believed in “facilities based
competition.” Because if you didn’t build it, you were a parasite sucking off
someone else’s network and discouraging them from investing. Unfortunately for
the FCC, the telcos were subject by law to a whole bunch of rules that allowed
those 6,000 independent ISPs to have access to their DSL loops for resale.
Dismantling all those rules so that the FCC could free the incumbent
local exchange carriers
 (ILECs)
aka the incumbent telcos, from the blood sucking grip of all those competing
local exchange carriers (CLECs) and competing ISPs would take some time.

Also at that time, we wanted to see companies invest in fiber to
the home. (Yes, we have been pushing for FttH for mor than ten freakin’ years now!) The
ILECs repeatedly told the FCC that as long as they were required to share their
networks with competitors, they would never, ever, ever build FttH. Why?
Because getting a profit on wholesaling capacity was not enough “incentive.” In
order to have enough “incentive” to build fiber to the home, the ILECs needed
to be able to “capture” the entire customer just like their cable rivals. And
even if consumers would benefit from having a much larger choice of providers,
it didn’t matter because (a) ILECs weren’t going to build FttH unless the FCC
gave the ILECs regulatory relief; and, (b) CLECs were just ‘takers’ and not
‘makers,’ and therefore unworthy of the provisions of the 1996 Act instructing
the FCC to open up ILEC networks so that consumers could have lots of competitive
choices.

Perhaps unsurprisingly, the Republican majority adopted this
reasoning and, in 2003, issued an Order called the Trienniel
Review Order
 (please don’t ask why). Of relevance here, the Order for
the first time made a distinction in the legal obligations for ILECs that built
Fiber-to-the-Home and those that didn’t. In exchange for actually building
FttH, an ILEC would be free of the unbundling requirements that required it to
share its facilities with competitors.

Because the FCC did this to provide incentive to ILECs to build
fiber, this did not go the nature of the service and did not alter all the
other obligations on the telephone component of the fiber line. If you offered
traditional phone service over fiber, it still got regulated as a regular phone
service – except for the parts the FCC explicitly exempted.

The Difference Between IP and TDM

Meanwhile, another change was happening. IP-based telephony started
to get good enough that it could now seriously compete with regular telephone
service. Vonage therefore filed a Petition with the FCC asking the FCC to
declare that voice-over-IP (VOIP) services were not traditional phone services
governed under Title II of the Communications Act, but “information services”
governed under Title I of the Communications Act. Vonage also asked the FCC to
preempt state public utility commissions who believed that if it looked like a
phone, acted like a phone, used phone numbers, and got marketed to subscribers
as a phone, then it was a
freaking phone, dammit!

Confronted with the conflict between what the Communications Act
actually says (“if it looks like a phone, and acts like a phone, and gets sold
to the general public as a phone, it’s a “telecommunications service”
regardless of underlying technology”) and what the FCC wanted to do
(“oooohhhhh, magic IP pixie dust make nasty bad bad regulations be all gone”),
the FCC temporized. Starting in 2004 with the Vonage
Petition
 and the Minneapolis PUC case,
the FCC generally preempted state authority and started making all kinds of
distinctions. Computer-to-computer VOIP that didn’t use phone numbers was
clearly an information service (so far so good, that doesn’t look like a
phone). Then the FCC started to parse between “interconnected VOIP” (VOIP that
connects to the PSTN) “nomadic VOIP” (VOIP services like Vonage that are not
facilities based, but still act like phones) and “facilities based VOIP.”

The FCC refused to classify all flavors of VOIP other than
computer to computer either as a Title I information service or a Title II
phone service, although it did preempt the states from doing a lot of things.
As a result, the default for any flavor of VOIP was ‘no regulation.’ Perhaps
unsurprisingly, all the cable operators who had been providing phone service as
CLECs under Title II promptly filed Section 214(a) requests to discontinue
Title II telecom service and offer the exact service as an unregulated VOIP
provider. While the FCC generally granted these requests, it also ran a couple
of proceedings to determine how to regulate VOIP and applied a number of rules
applicable in the Title II telephone world to VOIP (without deciding if it is
Title I or Title II) through the mechanism of “ancillary authority” and a dash
of Section 706.

So to the extent VOIP of any flavor has any regulation (with the
exception of 9-1-1, which comes from the
NET 9-1-1 Improvement Act of 2008
), it comes from ancillary authority –
which may or may not work, depending on what side of the bed your panel at the
D.C. Circuit woke up on that morning (“D.C. Circuit – ‘cause who needs a
rule of law?”).

Bring It All Together: AT&T Is Not Doing
FttH and Verizon Is Ripping Out Copper

So to bring this all together here, when AT&T says it will
invest $14 billion dollars to upgrade its network to all-IP, that doesn’t mean
it will do fiber to the home. In fact, to its credit, AT&T has never
pretended otherwise. AT&T has promised to rip out rural copper to some
degree (although pointing out that they still need copper or something to run
to cell towers to actually carry the traffic), but they were quite
specific about the limits of their upgrade in their press conference in
November
. Heck, they talked about upgrading their DSL capacity for U-Verse
by going to vDSL. DSL (of any flavor) is a copper-based technology. If AT&T says “we’re
upgrading to vDSL” and other people hear “we’re going to put in fiber just like
Google in Kansas City!” that is not AT&T’s fault.

Yes, AT&T has been boasting about how this is an upgrade to
its network and bring better broadband to rural America and throughout its
service territories. That’s true because the upgrade to go to VOIP and turn off
TDM requires an upgrade of its current aging copper plant. But there is a big
difference between “new and improved” and “we’re doing fiber.” No doubt
AT&T is happy to profit from the confusion, just as McDonald’s is happy
when people mistake “we make our fries without trans fats” for “our fries are
now totally healthy for you.” But this isn’t a case of AT&T telling big
‘ole whoppers to credible legislators and offering magic beans (like they did
in ’07 when they promised to lower prices if they got franchise reform). Ask
AT&T and they will tell you upfront they are not doing FttH, although they
will follow that with how wonderful the new and improved network will be.

Meanwhile, Verizon replacing copper with fiber is not
“discontinuing a telecom service” requiring permission from the FCC under
214(a) – as long as they continue to offer “basic” TDM-based voice on their
fiber system. What they are technically doing is upgrading their lines.
Technically, this also requires a 214(a) permission from the FCC. But the FCC
granted telecom providers blanket permission for all line improvements back in
the 1980s, provided they keep offering the same services. True, CLECs filed a
Petition with the FCC to regulate “copper loop retirement” back in ’07, because
eliminating the copper cuts off access for CLECs and others that use the
facilities – like alarm companies. While Verizon voluntarily suspended its
copper loop retirement for awhile to see if the FCC would actually do
something, nothing stops Verizon from going back to replacing copper with fiber
like it was doing before the ’07 Petition was filed.

Conclusion

The most unfair thing about all this is that the 1996 Act tried
really, really hard to eliminate all the stupid, arbitrary technological
distinctions the FCC traditionally used to distinguish similar services for
regulatory purposes. That why the definitional section keeps saying things like
“without regard to the technology used.” But the FCC kept putting them back in,
and any time they didn’t the D.C. Circuit would whap them over the head to
force them to deregulate further (because who needs an expert agency when you
have judges who are members of the Federalist Society?).  This leads not
only to regulatory confusion and companies playing all kinds of regulatory
arbitrage games. It also leads to the public having no understanding of what they
are actually supposed to get with the upgrade of the PSTN to IP.

Until the FCC unsnarls the mess of definitions and
classifications, we will continue to wing it. But we must not be seduced by the
Cult of Copper in the mistaken belief that this is about copper v. fiber, or
assume that because we are going to an all IP based network we will all get
fiber to the home. This is why we at PK believing in focusing on the Five
Fundamentals Framework
 at this point and less on these artificial
distinctions. At the end of the day, the phone system needs to work, reliably
and affordably, for all Americans. The technology may evolve, but the social
needs and goals remain the same.