Finally Moving from Words to Action on the IP Transition…

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For over a year, momentum has been building for the Federal Communications Commission to establish a series of wire center trials to test exactly how an all-IP world might work.  To FCC Chairman Tom Wheeler’s credit, last January the agency issued a formal IP Transition Trial Order outlining exactly what it wants to see in these trials, and yesterday AT&T took up the challenge by filing the inaugural test proposal.  Overall, I was impressed with the IP Transition Trial Order—it was written with a professionalism that has largely been absent from the Commission in recent years.  Like most FCC orders, the document was rich in implications, but there were a few major concepts in the IP Transition Trial Order that caught my attention.

First, the Commission repeatedly stated that it was not going to use these trials to resolve any legal and policy issues.  Instead, reasoned the Commission, the purpose of the trials would be to “endeavor to learn in diverse ways how the modernization of communications networks is affecting the achievement of our statutory responsibilities.”  (Order at ¶ 8.)  Indeed, the Commission’s goal is “to create arenas of innovation where providers and their competitors, and the customers of each, are free to explore a variety of approaches to resolving any operational challenges that result from transitioning to new technology and that may impact users,” believing that “such an environment is more likely to emerge if applicants are freed, to the extent possible, from the necessity of calculating the rippling legal and policy ramifications of each new action.” (Id. at ¶ 25).

Yet, while I salute the Commission for its willingness to go the full deregulatory Monty in these trials, I thought it significant that the Commission was also quick to emphasize that any “decisions about how to address or resolve a problem or dispute during an experiment will not constitute a determination by the Commission or service providers that such an approach represents binding legal or policy obligations outside the context of the experiment.” (Id.)  This includes an express statement that “all Section 214 authorizations granted during an experiment are conditional, and no provider may permanently terminate the offering of legacy services until and unless it receives a ’final‘ approval in which the Commission determines that action to be in the public interest.”  (Id. at ¶¶ 33, 79.)

I think the agency’s approach here is policy bold and politically clever.  On the one hand, it took courage to allow these trials to go forward in the first instance.  Indeed, it is not often we see an agency willingly conduct real-world experiments to see where its regulatory oversight may not be warranted.  (That said, as we demonstrated in our paper entitled Searching for a New Regulatory Paradigm:  A Comment on AT&T’s Petition for Wire Center Trials, participating firms are highly likely to be on their best behavior during the trials.)  On the other hand, should the trials for some reason fail, because the Commission was willing to take a regulatory “hands off” approach, the Commission cannot be blamed for undue interference.  Equally as important, should these trials fail for some reason, the Commission is sending an unambiguous message that it retains all of its existing authority to right whatever wrongs may occur to protect consumers.

My second observation about the FCC’s IP Transition Trial Order is that I thought the agency did a very good job identifying all of the “enduring values” we expect from our critical communications infrastructure.  These “enduring values” include, but are certainly not limited to: 911 capability, network security, network reliability, ensuring access to persons with disabilities, universal service, truth in billing, no cramming/slamming, local number portability, customer privacy and, of course, overall maintenance of quality of service.  While this list is long, it does bring into focus the contours of the existing “social contract” we have with telecommunications providers.  Yet, as discussed before, given the rapid changes in the industry, at the root of the IP Transition debate is the question of whether, and how, we re-negotiate this social contract.  Hopefully, the information produced by the trials will illuminate this debate.

That said, if there is an Achilles heel to the proposed trials, it may be (but not necessarily is) the fact that these trials are voluntary for both wholesale (¶32) and retail (¶6) customers.  Indeed, notwithstanding the fact that some customers may willingly engage in transactions, there may be other superior outcomes which will be foreclosed.  Telecommunications regulation is largely a cross-subsidy scheme, thereby creating numerous constituencies of receivership.  Much of this legacy regulation needs to go, but the beneficiaries of other’s coerced largess probably won’t play along.  So, in light of the agency’s hands-off approach and the trials’ voluntary nature, it is unclear how much useful (or unbiased) evidence will be gathered.  Still, perhaps half a loaf is better than nothing.

Shortly after Tom Wheeler became Chairman last year, he famously wrote that when it comes to the IP Transition, “The time to act starts now.  With the first application for a wire center trials now filed at the Commission, I guess it’s time to grab some popcorn and enjoy the show.