August 15, 2004  ·  Tim Wu

Ongoing August chatter: what should the Telecom Act of 2006 look like? Below are 6 items and some of the papers making the rounds.

Six Principles

1. Codification of the right to use the the applications and network attachments of one’s choice (otherwise known as Network Neutrality or Network Freedom).

2. Total and final destruction of the vertical regulatory classifications (Title II for common carriers, Title III for wireless, Title IV for cable), replacement with a simple horizontal model.

3. Full and clear preemption of most state and local regulation — ideally, with limited exceptions.

4. Directed spectrum reform — of virtually any kind.

5. Any VoIP rules that don’t kill VoIP.

6. Abandonment of ’96 Act “Unbundled Network Element” approach to telephony competition — the litigation costs just aren’t worth it.

I’ve left out alot here, but these are what I see as steps forward. Many other issues are battles over the division of existing rents — particularly the battles over voice.

If you want to catch up, some of the papers floating around are:

Richard Witt, A Horizontal Leap Forward
- One of the papers advocating horizontal instead of vertical regulation.

Wu, The Broadband Debate, a User’s Guide
- A preview of the positions in broadband.

Thierer, The Next Telecom Act
- Testimony on what CATO wants.

Yoo, The Economics of Net Neutrality
- Another view on broadband.

Werbach, A Spectrum Primer
- On spectrum deregulation.

  • Anonymous

    Thanks

  • http://www.benstanfield.com/ Ben Stanfield

    7. Absolutely no trying to sneak in another Communications Decency Act or any other legislation riders that you couldn’t get passed in anything but an omnibus reform bill.

  • http://isen.com/blog David S. Isenberg

    Tim,

    I think this is a constructive first step, and a good conversation starter. So let the conversation begin!

    My main beef is that the Six Principles are sadly missing a prolog. What and who should the network be for? It needs a “we hold these truths to be evident” clause. I would propose that it should say something like:

    Because communication is inherently valuable and essential to all human beings, the Internet should be designed, coded, and regulated to optimize its connectivity and usefulness to all humans everywhere. Governments should make no law, and coders should write no code that negates, countervenes or diminishes this central value.

    Such a prolog informs the reader of the Six Principles e.g., *who* has the right laid out in Principle #1.

    A couple other points:

    Re #4: Spectrum reform of any kind? Really???

    Re #5: One person might think that Regulation X would kill VOIP, while another might think that the very same regulation would make VOIP safe, or make it more acceptable, or something.

    Re #6: Abandoning the UNE strategy is one way to go, but putting real teeth in it, e.g., the government will step in if you don’t (the way Japan successfully unbundled) is another way to go.

    To sum up my first impressions: Tim Wu’s attempt is valiant and important, but naive and incomplete. (My first reactions to it, above, are equally naive and incomplete.) We needs a lot more work to create a viable guide to the next telecom act!

    David I
    this is also blogged at http://isen.com/blog

  • Keong Lim

    I like (1) Network Neutrality. Avoiding repeats of the broadcast flag will be a good idea.

    Perhaps (5) VoIP will come automatically as a result of (1).

    Regarding (4) spectrum reform, not sure how it works in the USA, but in Australia, spectrum tends to be auctioned in a once-in-a-lifetime sale that brings windfall profits for the government. The windfall is more or less massive depending on economic conditions at the time.

    Some problems I see with this:

    - the government only gets a one-off gain with a ‘sell the farm’ mentality to get government out of a temporary budget squeeze that compromises future generations

    - to maximise the gain, the government restricts availability of spectrum and engages in market timing to hit the peak of a boom, but it can be so wrong it ends up with very little money

    - the spectrum licenses are too long term, anti-competitive and helps vested interests and big businesses stay vested

    - spectrum allocation is rigid and potentially very inefficient, perhaps using out-dated policies and methodologies

    I’d like to see spectrum allocation defined purely in terms of signal strength and interference with other signals, rather than on specific techniques like strict frequency bands and guard bands. The techniques for minimising interference need to evolve with contemporary technologies. So, for example, a CDMA phone system could operate in the same frequency range as TV or radio, so long as they don’t interfere with each other above a certain threshold. This works because spread spectrum techniques like CDMA appear to be noise-like to TV/radio signals and TV/radio signals appear to be noise to CDMA, so they can tolerate each other, whereas two TV signals will obviously interfere too much.

    The key here is that all incumbents must agree to a reasonable threshold and all new entrants must show that they fall below that threshold in all theoretical and real world situations.

    This opens the door for new technologies, like software-defined radio, or smart transmitters that can search for gaps in the spectrum and use it without interfering with other signals. You could get a very high bandwidth channel by aggregating a few MHz here and there between existing transmissions. It also makes ultra-wideband easier to get up, because there are fewer roadblocks, even though it cuts across more frequencies. Efficiency of usage increases and innovation abounds.

    Assuming that spectrum licensing is still necessary, I’d also like to see licensing organised in shorter terms, perhaps as little as one year, with regular renewals. This will make it cheaper and easier to get initial access (which encourages innovation and competition) and will provide on-going revenue for governments (plus they keep more control of spectrum via renewals). There will be less market timing and artificial restriction of availability. It will be left to the market to decide what services should be provided and how much they are worth on an on-going basis.

    Existing businesses will need to be reasonably assured continuing access to spectrum to run their business, but otherwise, competitors and alternative uses should be free to come and go as they please. Businesses predicated on the scarcity of spectrum will probably suffer the most.

    Perhaps an analogy can be made with road transport systems. You can drive any manner of vehicle (push bike, motor bike, car, truck, Winnebago, Segway, etc) as long as it’s roadworthy and you follow the road rules. Different models and styles come and go, but everyone gets access to the roads.

    Thanks,
    Keong

  • http://techrumination.blogspot.com/ maverickbill

    I’d like to offer my take on the Telecom Act of 1996. Let’s first lay the groundwork for that Act. The “A” in AT&T stands for American and it was named as such because Vail who was the first president of AT&T had no issue with AT&T or the Bell System that handled primarily voice communication in the US would be regulated by the US govt. This would allow AT&T to use its superior long-distance technology to carry voice and force it competitors to sell out. There are independent telcos still out there.

    This allowed AT&T with its long distance operations to run the regional bell operating carriers/companies known as the RBOCs. AT&T was good ol’ MA BELL and the RBOCs handled local dialtone. AT&T handled long distance voice and telecom services. By allowing AT&T to be regulated, it gave up corporate independence for guaranteed monopoly of telecom in the US. With the Carterfone decision and MCI’s antitrust case against AT&T, AT&T eventually lost its monopoly and wound up divesting itself of its RBOCs. Through various market and technology drivers, AT&T would lose its lion’s share of it core business, long distance voice. Current per minute costs for long distance calls are miniscule and international rates has plummetted right alongside.

    The RBOCs ended up owning the “last mile” or its paid-off but managed copper AND fiber “plant” or infrastructure to reach the subscriber- the customer. The RBOCs have used fiber for years in the form of SONET to connect their Central Office equipped with telephone switches and to extend their “last mile” to customers far away from these Central Offices.

    The RBOCs aging copper plant is a liability for its business and residential customers simply because there’s a cost to maintain that network. As subscribers refuse to have multiple lines in the home, “telephone” line loss has been significant with the RBOCs as subscribers rely heavily on cellular phones.

    I agree with the opinion that the monopoly of the “last mile” is a noose around the RBOCs collective necks. They would of been smarter to separate their business into wholesale and retail and push for regulation that allowed their competitors to have access to their network elements such as their copper/fiber last mile to subsidize that aging plant.

    However, Devil’s Advocate would argue that competitors can add additional services on basic service and start to own the customer while the RBOCs simply become wholesalers and not have the ability to bundle local dialtone, long distance, DSL, broadband internet access, VoIP, and other services.

    VoIP requires end-to-end Quality of Service. IP by its very nature is “Best Effort.” VoIP typically requires UDP packets and other protocols that are based on “Best Effort” to cut down on latency and jitter that affect voice quality. This implies VoIP standards for carriers to carry traffic ubiquitously. With the traditional TDM-based voice network, this is guaranteed.

    What is the motive of FTTP by the RBOCs? To sooth investors that are looking to the RBOCs to innovate as their core voice business start to decline and a desire to have RBOCs appear as “growth” companies? Cable companies realization of its “triple play” strategy of providing media content (with pay-per-view sports and other types of “live” events, TiVO – selective, recordable content viewing), broadband internet, and VoIP – local dialtone service.

    The irony is that as the RBOCs are getting their way with UNE-P and UNE policy, it doesn’t allow them to innovate unless prodded to. With cellular as a technology disrupter that completely blindsided the telcos with the quick collapse of long distance rates, line loss, even RBOCs getting into the long distance market simply only allows them to add incremental margin for their efforts from the perspective of ROI. That’s an important lesson. Even if the RBOCs have cellular service, they’re still stuck with an infrastructure that has to be transformed to… what?

    VoIP is best effort. It doesn’t really create any cost savings for consumers. You still need either DSL or cable modem broadband access to subscribe to VoIP service providers such as VONAGE. One pioneer in this marketspace. The advantages with VoIP is that you don’t have to rely on the RBOCs for csutomer service issues. Now, you’ve got more problems. You have to understand a bit about routers, Network Address Translation, ports being blocked so your VoIP service can work. So you are your own IT helpdesk!

    But VoIP is making its way into the consumer market and businesses may like it simply because it’s based on software that can be quickly written to add ancillary services, unlike, the RBOCs that have to go to their telephone Central Office switch manufacturers to write up software to support oh, let’s say voice mail, call forwarding, caller ID, and to roll it out into their entire network and ensure proper testing, you’ve got a huge time lag to add new services. That’s an advantage of VoIP but reliability will suffer. Consumers have lowered their expectation with Quality of Service with widespread cell phone use it simply means that businesses that rely on voice service as mission-critical (financial sector) and those that can’t be bothered with VoIP will make the migration. Time will tell.

    I do know that technology exponentially progresses that collectively consumers, society, govts, and businesses can’t always adjust as changes in technology blindsides businesses. And telecom carriers are no exception. Now it requires quick assimilation of data and to see patterns and to quickly make educated gambles in strategy and execution to succeed.

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