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Lessons from the Derecho: When Industry Self-Regulation Is Not Enough

January 16, 2013 , , ,

The FCC released a fairly thorough report on the
widespread 9-1-1 failure that followed the June 2012 “derecho” windstorm. For
those who don’t remember, the derecho differs from most weather events by
coming up almost without warning. According to the report, carriers had
approximately two hours of warning from the time the derecho started in the
Ohio Valley to when it hit the D.C. Metro region.

As a consequence of the damage done by the derecho, Northern
Virginia experienced a massive failure of its 9-1-1 network, leaving over 1
million people with working phones (at least in some places) but no access to
9-1-1.  West Virginia experienced
systemic problems as well, as a did a scattering of locations in other states
impacted by the derecho. Verizon maintains the network in Northern Virginia,
while West Virginia is managed by Frontier.

In both cases, the report concluded that both Verizon and
Frontier failed to follow industry best practices or their own internal
procedures. To be clear, this was not a massive dereliction of duty. But the
accumulation of some corner cutting over here, some poor practice over there,
meant that when the unpredicted crisis hit the system suffered critical
failures precisely when most needed. Unlike just about every other part of the
network, where providers balance the cost of hardening a network against
potential events with a number of other factors, the core 9-1-1 system is
explicitly supposed to remain operational in even the most extraordinary
circumstances.  It is the foundation of
public access to emergency services. As long as I can contact the phone
network, I should be able to get 9-1-1 service. Public safety responders rely
on the public reporting emergencies so that they can efficiently deploy
resources as much as the public depends on its ability to contact emergency
services through 9-1-1.

It is particularly shocking to see this happen with Verizon.
As I’ve observed before, Verizon generally prides itself on maintaining a
high-quality network. Customer satisfaction surveys generally agree with this
self-assessment. It is part of Verizon’s overall business strategy: build the
best network, attract the customers willing to pay a premium for it. Yes, part
of that strategy means selling off or generally neglecting the copper footprint
outside the FIOS territories. But the 9-1-1 failure occurred in Northern
Virginia, precisely the kind of high rate-of-return territory Verizon targets
for top-of-the-line service. So what happened?

What happened in the derecho illustrates the problem of
relying on general incentives and industry best practices instead of regulation
for critical safety and reliability issues. In understanding this lesson, we
need to understand that it is not that Verizon (or Frontier, or other
companies) are evil or greedy or callous or any of the other delightful
adjectives people like to use to personalize this. It’s not. Verizon and
Frontier understand about keeping 9-1-1 going just fine. They are all for it.
They are part of the group that develops the industry best practices, which
they supplement with their own internal procedures.

Nevertheless, in economic terms, maintaining 9-1-1 is a
deadweight cost of doing business. Expenditures on 9-1-1 do not contribute to
the bottom line in the way fiber deployment or spectrum acquisitions do.
Maintaining the 9-1-1 system is essentially a “public safety tax.” Yes, they
get to recover the expenses in a general way through fees tacked on to the
phone bill. But when deciding whether to spend a dollar more on 9-1-1 or how
carefully to follow industry best practices rather than cut corners, the
rational network operator has plenty of countervailing incentive at the margin
to divert that dollar from 9-1-1 to something that contributes to the bottom
line, or to push off some recommended maintenance just a little bit, or
otherwise cut a few corners here and there.

The other important lesson is that, when dealing with
emergency services in extreme conditions, it takes relatively few errors to
have potentially far reaching impact. This makes 9-1-1 even more expensive to
maintain. What can pass as a reasonable practice in managing a giant enterprise
like Verizon’s telephone system is unacceptable in 9-1-1. Since all humans make
errors from time to time, this means additional checks and redundancies (and
workers). Again, while carriers have plenty of generic incentive to make sure their 9-1-1 systems remain intact, but
for any specific decision about
investing resources, the line worker or manager will invariably weigh the cost
against much more attractive alternatives.

 

Regulation Comes In
Where Industry Standards Are Not Enough

Regulation and enforcement change the incentive equation at
the margin. First, in a behavioral way, making a rule mandatory and putting in
an enforcement and monitoring structure generally make people take the
requirements more seriously. To take an every day example, we all have
incentive to drive carefully. We still have posted speed limits, because that
sets an expectation about what it actually means to drive carefully.  We have enforcement and penalties, because
otherwise people decide to let their own judgment about what’s safe be their
guide.

The other rather direct way it alters incentive is that it
increases the direct cost of not making the investment. To use the speed limits
analogy, I may still decide to go 50 in a 30 MPH zone because I’m in a rush and
decide to risk it. But I’m a lot less likely to do it in a photo-enforcement
zone and where the fine is doubled for going more than 15 miles above the speed
limit.

In looking at the lessons from the derecho, we need to
recognize that “industry has incentive to do X” is often not enough. In
particular, in the case of emergency and reliability requirements for networks,
we need to recognize that the general incentive of carriers to make sure their
network stays up in a crisis doesn’t guarantee the industry will do what they
need to do, because industry participants also
have incentive to spend that money on things that more directly contribute to
the bottom line.

That has several immediate implications. First, the FCC needs to make sure that all carriers are up to standard on 9-1-1, especially those carriers that actually maintain the 9-1-1 network rather than simply route 9-1-1 calls to the network. As I said above, Verizon and Frontier are not uniquely bad actors. Odds are good that every carrier — while generally compliant and taking their 9-1-1 obligations seriously, has similarly cut a few corners or neglected a few procedures here and there. Why? Because they all have the same incentives. A few spot inspections to make sure every carrier is on top of things will help prevent any similar 9-1-1 failures elsewhere.

Longer term, as the FCC considers both the response to Hurricane Sandy and the future of the phone network, we need to carefully consider where we need to rely on regulation rather than on industry incentives and self-regulation. That certainly applies to 9-1-1, but it also applies to network reliability generally. No network wants off time for any reason. But that does not gaurantee that carriers will find the right trade off between cost and benefit that we as a nation need in order to have a reliable infrastructure. When our broadband networks go down, it is more than an inconvenience. It disrupts business and disrupts people’s lives. Carriers have incentive to minimize dowtime, but they have other incentives as well. We need federal and state agencies to be willing to push carriers to spend that extra dollar when it’s needed, even if they would rather spend it on something else.

In short, Commissioner Rosenworcel is spot on in her statement when she says “it is time for an honest accounting of the resiliency of our
Nation’s network infrastructure in the digital and wireless age.” That starts
with recognizing that actual, enforceable rules with real teeth are necessary
to make sure that core emergency functions work properly. General incentives
are all well and good, but for critical emergency functions, they are simply not good enough.