Are You in "Club 2018?"

Telecom 2018 Workshop Participants Debate the End of the PSTN

About a month ago, the Technical Advisory Council (TAC) made a bold recommendation to the FCC: set a specific end date for the PSTN. This recommendation was largely based on a National Center for Health Statistics study that estimated only 6% of Americans would use landlines by 2018. This recommendation set off a flurry of debate, and it also brought the Telecom 2018 Workshop to Washington DC on July 28, 2011. This workshop was the first of probably many events dedicated to discussing issues related to phasing out the PSTN, and I was happy to have had the opportunity to attend. As one of the hosts said at the end of the conference, I will one day be able to tell my children that “I was there” when the industry started planning the end of the 130+ year telephone network.

The workshop really tested the waters to see what different stakeholder groups thought about setting a specific end date for the PSTN—the perspectives ranged across the board from reluctant to highly optimistic. The panelists and presenters came from all corners of the industry too—some of the companies represented were AT&T, Public Knowledge, John Staurulakis, Inc., Google, Acme Packet, Verizon, CEA, Telecordia and TIA. There were individuals from a variety of legal and consulting firms, and there was even surprise appearance by National Broadband Plan Director Blair Levin. The event was organized by Daniel Berninger, president of GoCiper Software, and co-moderated by John Abel from Team Lightbulb.

Two industry leaders gave opening remarks at the day-long event: Richard Wiley, partner at Wily Rein, former FCC Commissioner and leader in the lengthy transition to digital TV; and Tom Evslin, a member of TAC and a leading voice in the 2018 end-date recommendation. Wiley talked about the decades of efforts and evolution to finally accomplish the DTV transition, which he considered a success. According to Wiley, the elements of success in the DTV transition included reliance on the engineering community, open and transparent peer review, rigorous testing, opportunities for all participants to come together, the efforts of the Grand Alliance, and that the evolution was not dictated by the government. I considered all of these elements to be especially insightful for the road ahead in the telecom industry, especially reliance on the engineering community and not expecting or allowing the government to dictate the entire transition.

Wiley also explained that it is important to develop clear objectives, and it is especially important for consumers to understand what is going on by providing information with limited potential for misunderstanding. Wiley made an interesting comment that the eventual transition to an all-IP communications network may result in greater competition and choice, which will create “less need for pervasive government oversight,” and possibly eliminate the “demarcation lines” that currently segment the telecom industry.

Evslin discussed the lifecycle of the PSTN, noting that it peaked during the dial-up Internet era when people were rapidly adding second lines, but then it started to decline when DSL became popular. He strongly believes that the PSTN is nearing the end of its useful life, and he also stated that the more valuable POTS consumers have largely abandoned the service already. Evslin touched on the intertwined issues of reforming USF and ending the PSTN, and he argued that the PSTN is basically being kept alive by government programs. He said that USF was a good program but it has now failed, and the PSTN subsidies are hogging resources that should be going for broadband deployment. Evslin believes that January 1, 2018 should be the official end-date for the PSTN—he thinks that 6 years is a sufficient transition period and each extra year will just diverts resources that should go to IP networks. Evslin envisions an all-IP future where “all phones can be smart,” and the every-day office desk phone could have some really interesting capabilities, like the wireless smartphones we all use now.

The first panel of the workshop, moderated by Harold Feld of Public Knowledge was called “Deconstructing the PSTN: What Does it Mean to Turn it Off?” Valerie Wimer from John Staurulakis, Inc. presented the RLEC perspective in this panel, and she emphasized that RLECs utilize the same facilities for broadband as they do for traditional telephony. She also argued that rural carriers have unique challenges in terms of distance and population density, and Title II regulations are—and will continue to be—important for these companies. Representing the CLEC perspective, Thomas Jones from Willkie, Farr & Gallagher argued that we should think of Telecom 2018 as a transition, not as a retirement of the PSTN. He added that forcing the transition to a new technology will not necessarily solve some of the market failures that exist now, and an abrupt end to the PSTN could have negative consequences for price, choice and competition. Colleen Boothby from Levin, Blaszak, Block & Boothby agreed that technical evolution alone does not always change the market structure, and regulations will still be needed even in an all-IP ecosystem. Overall, this panel was fairly skeptical about the benefits of setting an end-date for the PSTN. Feld asked what would happen if we shut off the PSTN tomorrow; Wimer replied that networks would stop and RLECs would default on RUS loans.

The second panel, “Embracing Innovation Across the Ecosystem,” really brought up a lot of questions that must be addressed in the process of transitioning from PSTN to all-IP: interconnection obligations, non-discrimination principles, network neutrality principles (soon-to-be laws, presumably), device markets, privacy, the role of state utility commissions, open standards, and USF/ICC reform are all areas that must be analyzed closely. I was pleased that this panel discussed the importance of reforming USF and ICC in advance of setting an end-date for the PSTN. Panelists Barlow Keener (Keener Law Group) and Rick Whitt (Google) both agreed that there is a clear need to reform USF from “a world that is less and less relevant” to a world where USF subsidizes IP network build-out and network upgrades.

The rest of the day consisted of individual presentations from industry experts on transition solutions and deployment models.  Here are a few of the points that stood out to me:

• Mark Uncapher from TIA provided data analysis to illustrate that the decline in business voice lines has been much less dramatic than the decline in residential voice lines, which leads to the question:  How will the transition accommodate PSTN-reliant business customers?
• Don Troshynski from Acme Packet argued that there is “no one solution to fit all” in delivering IP networks, but successful networks will provide a superior user experience, service flexibility, and be secure, trusted and scalable.
• Link Howeing from Verizon explained that monopolies are not realistic in an all-IP ecosystem because there are multiple facilities-based competitors and different business models, unlike in a monopoly marketplace. He believes that there are real benefits to setting a firm date for ending the PSTN, but the industry should not get too caught up on a deadline and the corresponding regulatory aspects.
• Jesse Oxman from CEA talked about the success of the DTV transition and the consumer coupon program for converter boxes. He added that the last deadline push-back during the DTV transition was unnecessary and ended up causing panic and confusion. He thinks most of the lessons from DTV will carry over to the transition to all-IP.
• Bob Frankston from Frankston Innovating made some interesting observations about how bits are not consumable—they are like the alphabet and you cannot say “you used up the letter B, so you can’t use it anymore.” He used an analogy to compare the PSTN to IP networks, where PSTN users are like tenants with monthly fees and rules to follow, but IP users are like owners because bits can be used in any way, by any device, with no marginal costs.
• William Manning from Booz Allen Hamilton commented on the challenges for rural areas, saying “if you aren’t in an urban or suburban area, you’re toast,” referring to the apparent capacity challenges for rural ISPs.

At the end of the conference, Berninger went around the room and asked everyone if they were in “Club 2018” or not, and what they thought the next moves should be. I responded that I was indeed in “Club 2018,” but only if USF and ICC are reformed in such a way that rural telecom providers are able to continue investing in IP networks.

I believe that the next step in the Telecom 2018 process will be to get the engineering community involved, and continue bringing together diverse stakeholders to hash out the different perspectives. Generally, most of the attendees were in “Club 2018,” and several others also commented that it will be important to get regulatory issues like USF, ICC and net neutrality figured out before we can move forward. One 2018 skeptic argued that broadband adoption must be increased significantly before we can take away a viable means of communication. Overall, this workshop left me with a lot of things to think about regarding the future of communications, the role of rural telecom providers in an all-IP ecosystem, and how an end date for the PSTN may impact USF and ICC reform (and vise versa).

So, are you in Club 2018?

It's 2018: Where’s the PSTN?

Telecom Experts Argue PSTN Could be Dead by 2018

On June 29, 2011, the Technical Advisory Council (TAC) presented a newsworthy and controversial recommendation to the FCC: “The FCC should take steps to prepare for the inevitable transition from the PSTN,” and they should do it as fast as possible by establishing a specific end date. TAC referenced a National Center for Health Statistics report that determined only 6% of the U.S. population will use the PSTN in 2018; therefore 2018 seems like a reasonable year to put the PSTN to bed forever. There is no denying that landline PSTN customers are bailing at a rapid pace, but is 2018 too soon to expect 100% broadband and wireless adoption, such that no Americans are without at least one reliable communications connection?

Tom Evslin (a member of TAC, a telecom expert and author of the blog Fractals of Change) noted in a blog post last week that “People are making a free-market decision to abandon the PSTN for cellular or VoIP service.  People are chatting and texting and emailing and tweeting instead of talking.” Free market momentum aside, Evslin argues that the government needs to be involved in the transition so that people are not stranded without any form of communication, which raises special concerns for public safety. Regarding the phase-out, Evslin argues, “The date, in my opinion, should be the earliest possible time we can assure that alternatives to the PSTN are universally available, so long as we spend less public money in providing these alternatives than it would cost us to keep the PSTN alive past the date certain.”

Several of TAC’s recommendations have specific consequences for RLECs and rural Americans, because Universal Service is currently married to the PSTN. Although the FCC is hoping to reform USF to support broadband networks, we haven’t quite gotten to that point yet. TAC recommends that the FCC “change USF funding and spending to support universal coverage and other social goals;” and “assure that mobile and/or broadband replacements are available everywhere PSTN is currently provided. The need will be greatest in rural areas.” Although I agree that the PSTN is well on the road to dying a slow death, I feel that it might be a bit hasty to start looking at ways to expedite the death of the PSTN before the ink is dry on rules for reforming USF. Furthermore, I also think it is necessary to reform USF contributions, which currently come from PSTN services, before moving towards a PSTN-less nation.  

I think the real controversy comes in when deciding how to end funding for the PSTN in rural areas. Evslin asks, “Why continue to subsidize the most expensive and least effective way of keeping people in touch?” I feel that this question really gets at the core of the USF reform debate, as many believe that it has clearly become wasteful and inefficient for consumers to foot the bill for slow adopters to continue using landline phones. However, I think this issue needs to be looked at from the perspective of telecom providers who use the PSTN to provide DSL and other services in addition to telephone services. For many providers, telephone service is becoming the least important source of revenue and is basically just an add-on for broadband. As a result, consumers can utilize the PSTN foundation for landline calls or for VoIP calls using Skype or other over-the-top applications, and they can tweet and e-mail and Facebook all they want. Many consumers also like the security and reliability that a landline provides, even if they don’t use it very often, and this is especially true for households that have poor wireless coverage. Evslin also notes, “What about leaving great grandma with no 911 and no way to call her daughters?” How will the FCC ensure that all the grandmas are willing and capable of using wireless or VoIP before the PSTN is phased out? I know how much trouble it was teaching my own grandma how to use a cellular phone, so this seems like a fairly daunting challenge that must be addressed with great care and consideration for all types of consumers.

A blog post on Telecompetitor by Bernie Arnason also commented on the difficulty of defining the PSTN. He asks, “Are the fiber connections to the wireless towers which carry wireless traffic and eventually interconnect with the PSTN, part of the PSTN? Are copper local loops that provide DSL service no longer part of the PSTN?” I believe that these are definitely some of the most important questions—where do we draw the line between the PSTN that should be phased out and the PSTN that is an integral component of broadband and wireless communications networks? I wonder if there is really a point to ending the PSTN if USF subsidies are eventually going to be entirely for broadband anyway—if there is still a consumer demand for landline service, why not just continue to offer it at the company’s full expense? I personally liked Hargray Telephone Company’s Broadband Incentive Plan for USF because it allowed for ongoing landline cost recovery as long as there were landline customers, but increased the subsidies for broadband depending on the broadband speeds that customers subscribed to. So, a company could in theory only have 10 landline customers in 2018 and therefore only get support for those 10 customers based on their 2011 support level. Meanwhile, the real cost recovery would come from the 10, 20, 100 Mbps broadband customers, where the company would get the 2011 landline recovery amount times a weighting factor based on the speed.

The discussion on ending the PSTN is definitely in the early stages, so it is hard to tell if TAC’s exact recommendations will come to fruition or not. TAC also recommends updating the National Broadband Plan to include the PSTN phase-out, but I think that the USF reform rules should be published before this step can be considered more seriously, else the FCC may end up creating even more anxiety-inducing regulatory uncertainty. Meanwhile, it wouldn’t be a bad idea for RLECs to start thinking about 2018, and start estimating their cord-cutting rates for the next few years. It also might not be a bad idea for RLECs to start teaching the local grandmas how to use cell phones and Skype.

Learn more about TAC’s PSTN recommendations here. Tom Evslin’s blog post is available here, and Bernie Arnason’s is here.