Competition Versus Regulation in the Post-Sunset PSTN

Abstract

This paper proposes a new framework to address competition, consumer protection and public interest concerns in a “post-sunset” PSTN broadband ecosystem” (BE). In the BE, enterprises are connected horizontally and vertically. Envisioning those enterprises as points within a three-dimensional lattice, it models a way to balance promotion of competition with a range of policies of governance in the absence of competition. This is a response to the current regulators’ dilemma that companies like Google, Facebook, Amazon, Apple, Microsoft and others are now in many of the same markets as companies which were once primarily carriers such as AT&T, Verizon, Time Warner and Comcast, which are now rapidly diversifying and fleeing into an unregulated all-IP mode.The FCC’s National Broadband Plan (NBP) envisions ubiquitous broadband access in the U.S., accomplished by a transition from traditional telephone technology – analog circuits, TDM switches, related infrastructure components – to an Internet Protocol (IP)-based national broadband network. However, the NBP does not specify a specific migration path from the old network to the new one, leaving critical questions of technology, business and regulation unanswered. The FCC and the market are now in a race to see which will answer them first.This transition is being “forced” by old TDM equipment reaching end-of-life and by large numbers of customers migrating away from traditional wireline voice communications and substituting mobile, VoIP and other alternatives. As the subscriber base declines, but the cost of maintaining the old network is fixed (or increasing), the cost per customer rises and profitability decreases, creating a voice “death spiral”. The major telecommunications carriers are already rapidly distancing themselves from the “old” telecommunications service and moving to diversified IP-based services.In the technical area there are transition questions about numbering, interconnection and interoperability, quality of service, and spectrum among others. From the business perspective, traditional carriers are faced with finding new business models to function in what can be described as a three-dimensional lattice that comprises the metastructure of the BE. From a regulatory perspective, there is a fundamental challenge as to whether the FCC has any jurisdiction over IP-based services at all under current rules. A long-term solution to these problems requires a new way of thinking about the structure of the market as implemented consistent with the NBP.The FCC has initiated a process to consider this, within the presumed scope of its current jurisdiction, although it may ultimately require Congress or the courts to define that scope. At the same time, the major carriers such as AT&T, Verizon, Time Warner and Comcast have initiated an aggressive campaign to have all IP-based services deregulated as “information services”. Arrayed against this are civil society/public interest organizations devoted to sustaining the traditional “social contract” with respect to communications in the public interest.The ultimate outcome is uncertain, but it appears neither side has the political influence to win a total victory. Given that, some policy experts are proposing a “middle way” in which the broadband network evolves against a set of general principles to assure competition and protect the public interest. This could involve an ex ante anti-trust/consumer protection approach, or a light-touch version of traditional regulation. However, there is as yet no coherent theoretical framework within which to decide what action (or forbearance) is appropriate under what conditions. This paper’s three-dimensional lattice model is a step in that direction.