Transition to IP Technology Requires Some Oversight

March 28, 2013

Internet Protocol (IP) is the technology used by virtually every telecommunications company today. Considering we’re now well into the 21st century, it is more than appropriate to commence a dialogue on the regulatory and competitive implications of transitioning from an original network technology that has its origins in the 19th century, more than 100 years ago. The transition to IP networks holds the potential for enormous benefits, including greater efficiencies for carriers and new, innovative services for consumers at lower prices. Although conversion to a different technology has been underway for years, regulators cannot afford to simply assume the transition by itself eliminates the need for all oversight of the relationship between incumbents and other carriers. To the contrary, it is more important now than ever for the Federal Communications Commission (FCC) to ensure network interconnection arrangements keep pace with the new technology’s many benefits.

The “IP transition” has multiple facets and many important implications, including increased consumer broadband options, availability of new and innovative services, and more efficient, lower-cost networks are a few of the major ones. This last aspect can be one of the principal benefits of the IP transition: the deployment of a more efficient and reliable IP network architecture that is able to reroute traffic to avoid outages. IP networks are self-healing and redundant, allowing alternate routes to be created dynamically. As a result, interconnection among networks requires far fewer points of interconnection (POIs), and those interconnection points are completely unrelated to the hub-and-spoke design of the current public switched network, which is tied to traditional ILEC (incumbent local exchange carrier) tandem switch locations. In this respect, one of the ways we can tell if the IP transition has “succeeded” is whether we are able to move to a physical network structure that is more rational, effective, and efficient than the traditional tandem-centric telephone network.

Industry and consumers will not reap the full benefits of the IP transition so long as competitive carriers are required to deliver IP traffic to tens of thousands of different POIs used today in legacy wireline networks. Large incumbent carriers are resisting efforts to update interconnection arrangements with other carriers, while at the same time seeking to undo all FCC oversight. Those carriers continue to require competitors to exchange communications traffic at a huge number of different sites and argue that they have no obligation to interconnect using IP technology. Indeed, even when their own affiliates use IP technology, some incumbents require competitors to down-convert to the old technology before interconnecting.

The incumbent carriers’ arguments for removing FCC regulation in this area are as antiquated as the technology to which they continue to cling. Simply put, they want the authority to raise prices and refuse network interconnection to competitors (or offer it only on their own unilateral terms). Because no telecommunications network can stand entirely on its own—on the simplest level, one carrier’s customer must be able to call another carrier’s customer—deregulating, as these largest carriers suggest, would be devastating to competition and consumers. It would also undermine the very efficiency and reliability purposes of converting to 21st century technology.

Instead of stepping away from all regulation, the FCC should establish a set of regional POIs for IP interconnection, which would serve as defaults in the event carriers are unable to negotiate mutually agreeable arrangements. The FCC should also take steps to facilitate a trial to test those POIs, as well as other interconnection obligations and rights in the new technological environment. A new look at regulation is certainly warranted as we convert to IP technology. The new technology by itself, however, does not justify wholesale relinquishment of regulatory oversight needed to ensure the transition lives up to its enormous potential benefits.