Washington Focused on Wrong Policy Issues, Say VON.x Attendees, As Panelists Debate
1 April 2008
SAN JOSE, Calif. - VON.x audience members at a discussion of competition policy in the "Internet-enabled world" challenged panelists on whether Washington policy-makers are addressing the right questions and whether winning regulatory classification battles could put Internet-based providers at the losing end of the regulatory playing field.
Brooklyn Law School professor Jonathan Askin, moderator of the daylong "competition policy" preconference workshop at pulvermedia's VON.x, urged audience members to take over the discussion if it wasn't going in the direction they were interested in.
From the audience, Brough Turner, senior vice president and chief technology officer of NMS Communications, said that the issues that are the focus of telecom policy debates in Washington are "totally irrelevant" in the context of gigabit-speed connections and over-the-top services. "We're not talking about the right thing if we're talking about telco regulation and cable regulation," he continued, because telco and cable offerings "are just services traveling over the network."
Mr. Turner urged the panel to make clear to Washington policy-makers that "high-speed" connections in the U.S. are lagging those in some other countries by "two orders of magnitude."
Also from the audience, Jim Kohlenberger, executive director of the Voice on the Net (VON) Coalition, asked whether the potential treatment of voice-over-Internet-protocol (VoIP) as a broadband service under Title I of the Communications Act could end up perversely subjecting it to more regulation than it otherwise might face.
Mr. Kohlenberger noted that Federal Trade Commission Chairman Deborah Platt Majoras has indicated her intention to consider what consumer protection obligations should apply to VoIP providers. He asked panelists whether being regulated by the FTC rather than the FCC could "create a competitive disadvantage for new services."
During the first panel, Michael Pelcovits, principal at Microeconomics Consulting & Research Associates, Inc., said that when considering antitrust issues, "you always have to go back to first principles [and ask] what are the incentives of the company you are alleging anticompetitive behavior by?"
Kevin Minsky, policy counsel-U.S. legal/corporate affairs at Microsoft Corp., said that because VoIP providers don't need a physical presence in every country where they operate, the barrier to entry when it comes to offering services globally "is much lower than it was just a few years ago."
However, Mr. Minsky added, trade barriers and regulatory classification questions continue to present challenges for VoIP providers. From one country to the next, it can be an open question whether VoIP providers are subject to access charges, whether they have direct access to phone numbers, and whether they can connect to trunks for emergency communications.
Christian Dippon, a vice president at NERA Economic Consulting, called for extreme caution in using ex ante regulation.
Mr. Pelcovits said that there is "still a need for targeted ex ante regulation."
Lawrence Spiwak, president at Phoenix Center for Advanced Legal & Economic Public Policy Studies, argued that because private-sector companies do not take externalities into account, they are likely not to block as much as they should if a bandwidth hog is degrading the experience of other customers. "If we had a public planner who didn't care about profit, he'd probably be blocking more" in an effort to maximize aggregate network benefits, he added.
The second panel focused on antitrust issues. Mr. Askin remarked that he's "always a little scared" to have antitrust panels at telecom policy events. "It's like we're little kids playing in the sandbox [at the FCC] and now we're running to the adults" to resolve issues too big to be resolved under telecom legislation and regulation, he said.
Glenn Manishin, a partner at Kelley Drye & Warren LLP and moderator of the antitrust panel discussion, responded, "But it was antitrust cases that opened the industry up to competition in the first place." He added that there have been major antitrust cases in the telecom industry "about every 30 years ... [so] we're due for another one."
Panelist Mark Ostrau, a partner in the law firm of Fenwick & West LLP, said that working through standards development and standards-setting organizations is generally viewed as pro-competitive, since having standards on which competitors can rely can increase efficiency, ease interoperability, lower barriers to entry, and facilitate comparisons between products.
However, Mr. Ostrau added, there are hazards of raising antitrust scrutiny, for example, if a standard is developed that appears to be targeted at harming a particular competitor or class of competitors. In addition, membership in the standards group should be open, and participants must be sure to disclose the existence of relevant intellectual property.
FCC's Record Debated at 'Town Hall'
During the traditional "town hall" discussion at VON.x, a panelist suggested that the Universal Service Fund should "contemplate giving some funding to organizations like wikipedia."
During the lively give-and-take with the audience, panelist Lowell Feldman, chief executive officer of Feature Group IP, which has a pending petition asking the FCC to forbear from applying access charges to voice-embedded Internet communications carried on the public switched telephone network (PSTN), suggested the USF support could go to nonprofit projects like wikipedia that add value to the Internet.
An audience member asked why the FCC has not been more successful in pursuing such goals as implementing the local competition provisions of the 1996 Telecommunications Act and getting broadband service out to rural communities. Mr. Feldman opined that the FCC "gave up on implementing the [Act] in their third triennial review."
Another panelist, Larry Irving, who headed the National Telecommunications and Information Administration during the Clinton administration and is now co-chairman of the Internet Innovation Alliance, said "litigation had as much to do with it as anything else." He added, "Access to capital dried up" for competitive carriers. "You're blaming the FCC but in most of those cases" of FCC failure cited by the questioner, lack of progress can be attributed to "litigation and judicial developments," Mr. Irving said.
Commenting on the broadband deployment issue raised by the questioner, Link Hoewing, vice president-Internet and technology policy at Verizon Communications, Inc., said, "Our investment is pushing cable" to deploy, adding that cable systems have "a good network in but they need a good network out."
Mr. Feldman recommended that the government "open up a huge swath of spectrum" for unlicensed use by Wi-Fi networks and other devices using 802.11 protocols.
Weighing in on the question of the FCC's lack of success, Rick Whitt, Washington counsel-telecom and media at Google, Inc., said, "Increasingly the FCC seems to be micromanaging ways for the technology to fit itself back into the PSTN," rather than setting a goal for new providers and allowing them to figure out how the new technology can meet the goal.
An audience member from the European Union suggested that the U.S. should follow the lead of some European countries that have mandated unbundling of broadband networks so that competitors can offer services. Mr. Irving responded, "We don't have the unbundling rules, so we have to try something else." He added that U.S. public policy typically relies more on markets, so "we're not going to use public money to do this [deploy broadband networks]. There probably isn't public money [for that purpose], given our deficit."
Jurisdictional Debate Raises USF Issues
During a discussion of jurisdictional authority over VoIP services, complaints about the universal service system were raised by the panel, the audience, and the moderator. Now in the audience, Mr. Feldman of Feature Group IP said that in state-level policy debates, incumbent network operators bring VoIP deregulation efforts to a halt by raising concerns about what will happen to universal service if VoIP providers are not required to pay into the system.
Mr. Askin said that the numbers-based contribution solution backed by some in the industry is "a five-year solution" - that is, it will be overtaken by technological and market changes as communications depend less and less on phone numbers and more on IP addresses.
Panelist Rick Cimerman, vice president-state government affairs at the National Cable & Telecommunications Association, said that incumbent broadband network operators, such as cable system operators and telcos, would have a problem with basing Universal Service Fund contributions on the capacity of a network connection, "since we give the most capacity for the buck."
David Young, VP-federal regulatory at Verizon Communications, Inc., called on the FCC to "finish the business of asserting jurisdiction" over VoIP services.
Sprint, Qwest Officials Talk Technologies
A "new paradigm" of open networks and embedded-chip capability is developing, Ben Vos, Sprint Nextel Corp.'s vice president-technology development, said on the first day of the conference proper.
With the ongoing proliferation of devices with special uses and special interfaces, end users will nevertheless expect a "seamless, simple, ubiquitous experience," Mr. Vos said. To make this move to multiple devices with embedded-chip capability, customers will have to be able to purchase nonsubsidized devices that they can take to whatever carrier they might choose, he added.
In this environment, Sprint needs to be "very focused on being an intelligent pipe, not just a dumb pipe," and to develop a model for monetizing smart-pipe capabilities that are useful to third-party application and content providers, Mr. Vos said. He explained Sprint's selection of WiMAX as driven by that technology's cost-performance benefit, its ability to meet Sprint's rollout time line, and its ability to support the embedded device model "through a growing global ecosystem."
He added, that because the wireless technologies being deployed "are only wireless in the last mile or so," Sprint's ability to leverage its expertise in wireline Internet protocol backbone communications is important.
During a presentation later in the day, Pieter Poll, chief technology officer with Qwest Communications International, Inc., said that Qwest's public IP traffic is currently doubling approximately every 16 months - which, he pointed out, outpaces Moore's Law, which says that computing devices double capacity about every 18 months.
During the dial-up Internet era, Mr. Poll said, people ordered two and three lines to their homes, and carriers like Qwest invested heavily in access plant. However, once digital subscriber line service came along, people started cancelling their second and third lines and even replacing primary lines with wireless service. Now, "we've got some spare copper; what a great way to use it to bond it together and use it to deliver broadband," he said.
Mr. Poll predicted carriers will begin cooperating to create geographical diversity for their networks.
This article first appeared in Telecommunications Reports. © Copyright 2008. Aspen Publishers. All Rights Reserved.
