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The FCC’s IP transition order doesn’t slow down data markets, yet

The Federal Communications Commission approved an order yesterday that provides broadband operators with requirements for how they should approach the transition from analog-based networks to 21st century internet protocol networks.  The FCC’s focus was, as expected, on the impact the transition would have on consumers.  Broadband providers are to provide consumers with three months notice of any plans to replace copper with fiber.  Broadband providers are to give interconnecting carriers six months notice of a transition from plain old copper to fiber.

FCC member Ajit Pai raised the argument in a dissent to the order that the FCC’s notice requirement would have a negative impact on the deployment of fiber facilities and investment of capital.  He says:

“First, by dragging out the copper retirement process, the FCC is adopting regulations that ‘deter rather than promote fiber deployment.’”  Mr. Pai questions the logic of requiring capital be invested in maintaining old legacy networks when the deployment of fiber could remedy issues presented by an aging copper network.

FCC member Michael O’Rielly warned edge providers in his dissent that they would be negatively impacted by the requirement that broadband providers seek permission first from the FCC before discontinuing a legacy service.  ”Every communications and edge provider better think long and hard before introducing new services because you may be locked in to providing them for a very long time.”

The irony is that by forcing broadband providers to maintain legacy networks to end users, the FCC runs the risk of creating the degradation of service it hoped to avoid when it implemented its net neutrality rules.  Take for example the FCC’s findings in its 2010 Open Internet Order.   In the order the FCC describes the “virtuous cycle of innovation” that is spawned by the openness of the Internet.[1]

“This openness promotes competition.  It also enables a self-reinforcing cycle of investment and innovation in which new uses of the network lead to increased adoption of broadband, which drives investment and improvement in the network itself, which in turn lead to further innovative uses of the network and further investment in content, application, services, and devices.  A core goal of this Order is to foster and accelerate this cycle of investment and innovation.”

The FCC went on to point out in the 2010 Order that a lack of transparency in terms of network management put edge providers at risk especially where a broadband provider’s activity led to blocking or degrading of content.  The irony is that while the FCC appears focused like a laser beam on promoting competition in the provision of broadband services by making legacy networks available for use by interconnecting and competitive carriers, it has taken its eye off of the real competition on the internet, namely between edge providers that aggregate, display, and distribute data.  These edge providers want their exchange of data to traverse high-speed networks from their location to the end-users.  While their business models may not be directly impacted in the very short run by the FCC’s IP Transition Order, in the immediate run they may find users unwilling or unable to subscribe to their services because deployment by broadband providers of last-mile high-speed facilities are being delayed by the FCC’s latest notice requirements.

1.Federal Communications Commission. Open Internet Order. 2010. https://apps.fcc.gov/edocs_public/attachmatch/FCC-10-201A1_Rcd.pdf

 

 

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Do we really need a rule to get consumers to buy a power supply?

The Federal Communications Commission wants to do a little more hand holding.  Yesterday it released a notice of proposed rulemaking that requires that communications companies give notice to their subscribers when changes are made to their networks.  In particular are changes to their networks that involve replacing copper with the fiber optics networks upon which digital information rides.  The Commission is also concerned that the transition to internet protocol-based services may leave consumers in the dark about the performance of communications services during power outages.  Unlike old school, copper-based, analog networks, the new optical networks are not capable of driving backup power to a customers equipment.

With a phone connected to an old analog network, all the lights could go out in your house, but the phone will keep working allowing you to call the power company to complain about having to make a call while holding a candle.  Fiber optics, on the other hand, don’t have that capability.  If you are a Vonnage customer or get your wireline phone service from a cable operator, you may have to purchase an uninterruptible power supply device.  This device is a rechargeable battery system that senses when there is not enough power for your phone.

According to the website, Voip.com, there are three types of UPS equipment: the Standby UPS; the Line Interactive UPS; and the Online UPS.  The Standby version is the most efficient, licking in when the alternating current power supply to your residence goes out.  The Line Interactive version, while slightly less efficient than the Standby version, provides the benefit of smoothing out power surges.  The Online version is the least efficient but reduces the time between power failure and switch over to direct current.

These back up power supplies can provide power from fifteen minutes to several hours and researching their availability on the internet was rather straightforward.

I understand the need to maintain a communications network that facilitates commerce and contributes to public safety, but wouldn’t it be less intrusive if the Commission acted as a clearinghouse for information on backup supplies and allow the supply component of the market to address an obvious consumer need for backup energy supply?

Only Congress can get rid of the FCC’s social policy of coddling

The Federal Communications Commission is being inundated by calls from advocates that want the consumer protection regulations, typically applied to circuit switched services, to also be applied to services that traverse packet switched networks, networks that are themselves connected by transmission controlled protocol/internet protocol (TCP/IP).  To formulate any type of regulatory policy regarding the Internet, the FCC needs to remember two things.

One, the creation and deployment of the Internet has been taking place without any significant direct involvement from the FCC.  The Internet is the offshoot of the ARPANET, a federally subsidized computer inter-networking project designed to develop technology that enabled computers and the research communities  around them to talk to other computers and their research communities.  The increase in privatizing and commercializing the Internet has led to billions spent on backbone networks.

For example, Google, a newcomer to backbone investment in Internet terms, has spent years putting together its fiber optic networks and now has 100,000 miles of backbone infrastructure, greater even than number three mobile broadband provider Sprint.  Both Google and Facebook have recently invested in Asian submarine cables.

According to research done by Dr. Anna Maria Kovacs, the broadband industry has spent $73 billion between 2006 and 2011 on broadband infrastructure necessary to tie information end-users to the Internet.  In its 2013 annual report, Verizon reported an average of $16 billion in capital expenditures over the last three years with a significant amount going to broadband deployment.

Second, consumer access to the Internet has always been secondary to the Internet’s primary mission which is the exchange of information, data, and knowledge between producers of the same. Expanding the network by privatization and commercialization was merely a free market approach to providing additional revenue streams and funding to support the Internet’s original mission.

While end users contribute to the network effect by driving demand for more services and the increased capacity of the network to provide them with new services, the Internet was never designed as a telecommunications platform where Sally Sue calls up her mom for the recipe for making donuts.

Additionally since 1961, it was envisioned that networks connecting computers would be comprised of packet switching technology, not the circuit switched technology that open network advocates seem to want to keep Americans attached to.  Circuit switched networks have been deemed ill-equipped for exchanging data between computers and as the amount of data going over the Internet increases and end-user appetite for video traffic, the Internet’s biggest hog, grows, further expenditures on old legacy networks become increasingly uneconomical.

The Internet is data-producer centric.  Yes, consumers are important to its commercialization since they purchase the devices and access to broadband that makes the purchase of goods and services possible, but hamstringing further investment in infrastructure by considering the application of circuit switching rules to an Internet protocol environment will only serve to create market uncertainty,chill investment, and negatively impact knowledge market entrepreneurship.

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Maryland taking second shot at anti-IP Transition bill

Posted February 18th, 2014 in IP transition, Maryland and tagged , by Alton Drew

I learned today that Maryland House Bill 48 was withdrawn from consideration by its sponsor, but a new bill, HB 447 now takes its place.  The bill, according to Delegate Jeannie Haddaway-Riccio, is very similar to HB 48.  HB 447 can be found here.

HB 447 prohibits certain telephone companies from replacing landline service to customers with wireless service.  The Maryland Public Service Commission is also prohibited from authorizing certain telephone companies to replace wire line with with wireless services.

A hearing was held on HB 447 but so far no committee vote has been taken.

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The IP transition should have a positive impact on capital inflows

Capital flows to where it  can find the highest returns and in the broadband world, that area is internet protocol networks.  As Rick Boucher, honorary chairman of the Internet Innovation Alliance shared in a recent op-ed in The Hill:

“The dramatic shift toward broadband-based networks forecasts nothing less than the end of the aging telephone network first used in the era of Alexander Graham Bell. By the end of this decade, through a carefully planned process, all consumers will have transitioned to modern high-speed broadband networks.

Most consumers — essentially anyone who has a cellphone or who gets telephone service from a cable provider — have already made this switch without government action. Drawn in significant part by 4G wireless technology offering speeds comparable to the fastest wired broadband, consumers are fleeing the old network in droves. Today, less than one-third of the country uses it at all, and only 5 percent use it exclusively. It’s rapidly wearing out. Manufacturers don’t make new equipment for it, and the costs of maintaining it are skyrocketing. It’s a network with limited service functionality. As the transition to date underscores, consumers realize how broadband-based networks offer them far more. Driven by new technological opportunities, that’s the marketplace at work.”

Consumers here in the United States are ahead of the Federal Communications Commission when it comes to the realities of the broadband and information markets.  Consumers want data and content delivered quickly.  They are used to the simultaneous flow of text, voice, and data over their smartphones and tablets and are not about to go back to costlier old legacy alternatives that provide way less capacity needed to provide the benefits of convergence.

Remember the days of clicking back and forth on the telephone between two people in the same conversation?  Do you prefer that type of communication of yesteryear or do you like the capacity broadband enables for Google hangouts or talking to multiple people on Skype?

One example of capital seeking opportunity for high return I found way south of here in Jamaica.  Maybe it’s my homesickness combined with Atlanta’s recent two-inches of snow blizzard that guided me to this Capital Networks article.  The takeaway here though is that Jamaica’s information, communications, and technology infrastructure is an increasingly important asset and by description it is increasingly digital.  The strategic partnership between Capital Networks, a content provider, and broadband provider Flow Jamaica resulted in innovative services for the country’s tourist industry, and all on digital networks.

Here at home, Verizon provides an example of how broadband networks, particularly wireless networks, are being leveraged to attract financing from the capital markets.  In a recently issued prospectus for securities being issued to finance its buyout of Vodafone’s share of Verizon Wireless, Verizon wrote the following:

“Our strategy is to build upon the foundation and strength of our network assets as the platforms for future growth and innovation. We have a unique asset portfolio to drive continued growth and value over our networks and create an integrated experience for our customers. We are extremely well-positioned in the center of the trends that are driving growth in our industry – mobility, broadband, video, cloud services and security. Our portfolio of assets will enable us to better leverage our capabilities across the entire business.

In wireless, we completed our 4G LTE coverage build and continue to invest in our network to take advantage of the significant opportunities enabled by this technology, as we innovate around our customer solutions. We have further strengthened our portfolio of enterprise strategic services with the development of a new cloud services product suite, the launch of a mobile healthcare platform, and several targeted acquisitions which will enhance our capabilities in mobile video delivery.

We are confident in our ability to take advantage of the growth opportunities in our key strategic markets. We will continue to invest in our networks as the platforms for future growth and innovation.”

Investment is flowing to high-speed networks.  If the FCC is concerned about continued innovation in the broadband markets and wants to help facilitate flows of capital to broadband providers, a thoughtfully planned by expedited IP transition trial is imperative.