On April 7, 2011 the FCC released a Notice of Inquiry, initiating "a comprehensive examination" of the reliability and resiliency of our nation's telecommunications infrastructure, yet another inquiry with ties to the 2010 National Broadband Plan (PS DN 11-60; PS DN 10-92; EB DN 06-119). Through this process, the FCC will examine issues about maintaining continuity of telecom service in natural and man-made disasters and the possibility of mandating standards and requirements for network reliability and resiliency. During the UTC Smart Grid Policy Summit this week, the comment was made that it often takes a disaster to get industries (in general) motivated to improve safety, reliability, asset protection, etc. The situation in Japan has clearly influenced the FCC to get a jump start on the examination of telecom network continuity, reliability, redundancy and resiliency in the face of tragedy. I believe this NOI is a timely and necessary effort, but I worry about the implications of mandating technological and regulatory requirements on small telecom providers. I do not recommend that the FCC piles on any specific and potentially very expensive regulations while simultaneously attempting to reign in subsidies. Additionally, it is never a good idea to mandate specific technologies or protocols. By the time regulatory lag is taken into consideration, something that is an emerging technology today might be a faint flicker of light by the time the rules are implemented. Furthermore, mandating technology and protocol standards can impede innovation and pick industry winners to the detriment of other viable solutions.
For rural telecom service providers, ensuring reliability, resiliency, redundancy and network continuity goes beyond disaster preparedness. I see this issue from a business perspective--rural providers can help attract new businesses to rural areas by ensuring their networks meet the highest standards of "R&R." At the NTCA Legislative and Policy conference last month, one of the attendees from Iowa described a very memorable situation that his RLEC faced recently: a major business was interested in coming to his company's service area, but the business had very high requirements for network redundancy. The provider sought support from the FCC, but the FCC basically told them "its not our problem" Well, apparently the FCC is now making it "their problem" to investigate network R&R, continuity and redundancy issues. In addition to needing reliable and resilient networks to attract new businesses--such as industrial, financial, health care and utility companies--to rural areas, rural providers also need to think about their vulnerability to natural and man-made disasters. Unfortunately, rural areas are extremely vulnerable to tornadoes, floods, crippling ice and snow storms, and other disasters that not only make communications especially critical for public safety, but make it especially challenging for small companies to respond to network malfunctions. What happens when service goes down during a tornado, but all of an RLEC's key employees too far away to respond quickly or caught in the destruction themselves? Furthermore, consumers are beginning to rely more and more on Internet applications like Twitter and Facebook to communicate during times of distress--how do RLECs ensure that their customers have multiple avenues of access to emergency responders and their friends and family during a disaster?
I hope that rural providers plan to participate in this NOI and describe the unique challenges their companies face in providing network R&R. The FCC in fact is seeking input on this exact topic: "We are interested in gathering information about any other factors that have an impact on the ability to maintain or restore communications operations, including those which might be unique to specific circumstances. For example, which of these factors might be more significant with respect to smaller carriers, carriers serving rural areas, or those serving tribal lands? Are there sufficient numbers of properly trained technical personnel to deploy over widespread disaster areas, and if not, is this a factor in not being able to maintain or restore operations of communications networks during emergencies? To what extent do these issues apply to communications infrastructure in geographically remote locations? Do communications service providers have contingency plans in place if key personnel are unavailable to respond to a situation, and if so, how are such contingency plans implemented?" (FCC, 2011 pg. 8, para. 20). I believe rural telecom providers have a great opportunity here to tell the FCC exactly how they protect their network assets and ensure service continuity in the face of disaster, as well as communicate what they may need in order to maintain high standards of R&R going forward in the future with exploding data capacity demands and changes in consumer communication trends.
The FCC is curious about whether it would be better to implement mandatory or voluntary requirements for R&R, redundancy and network continuity. As I mentioned above, I don't think required standards or mandatory compliance is a good idea--I never think mandated technologies or burdensome regulatory requirements are a good idea for RLECs. The FCC asks if requiring emergency response plans would be a wise solution, and I think this should be about as far as they should go with requirements. I believe the market should determine which technologies and protocols are best, not the government. I also do not think the FCC would be able to encompass the diverse variety of communications providers and their equally diverse networks, customers, assets and infrastructure under a single set of regulatory or technology requirements. The regulatory lag in determining the best requirements for everyone would be extremely onerous, then there would be the issue of setting a timeline for compliance and enforcing noncompliance--this could all take years--and a major disaster is not going to wait around for regulations to be implemented.
I am very interested to hear from stakeholders on these issues. I will be paying specific attention to responses from both rural telecom providers and utilities, who have a key role in this inquiry if utility and commercial telecom providers have any intention of converging for smart grid deployment. I hope to see a lot of rural telecom providers submitting comments, which are due July 7, 2011.
Speaking of comments, USF reform comments regarding the Connect America Fund are due next week--I will be reading and summarizing as I did with the ICC comments. I hope to have something published by Wednesday, April 20.
Finally, Rural TeleCommentary hit its 1,000th pageview yesterday (with 101 total pageviews yesterday alone)! I am delighted about how well received this blog seems to be--I never expected it would become so popular. I have had readers from over 25 countries around the world--in every continent except Africa and Antarctica, and I'm starting to make headway with getting linked from other prominent websites and blogs. Thank you to all of my readers! I hope you are all finding my articles interesting and useful.
Cassandra Heyne
ruraltelecommentary@gmail.com
Edit 4/18/11: I caught this informative blog post by Gabriel Marcos of Global Crossing today which very clearly explains the meaning of "redundancy." Looks like he is doing a series of posts on the meanings of redundancy, resiliency, contingency, and continuity.
Gabriel Marcos (Global Crossing) on the meaning of Redundancy
Thursday, April 14, 2011
Tuesday, April 12, 2011
Day 2 of UTC Smart Grid Policy Summit: All About Cybersecurity, Customer Data Protection
April 12, 2011: The sessions in the second day of the Utilities Telecom Council Smart Grid Policy Summit took a hard look at two real hot-button issues of the moment: cybersecurity and customer data protection/privacy. These two issues are troubling and perplexing to many industries besides utilities, and I found it interesting to identify similarities and differences between the utility perspective and what I know about these issues from the telecom perspective. The Smart Grid is presenting some truly monumental challenges to how the utility industry has traditionally dealt with cybersecurity and consumer data protection, and effective solutions will definitely take ongoing discussions and collaboration across the utility and telecom industries, with regulators in both industries, with law enforcement and other government agencies, and with consumers. These two topics are especially interesting because it is very easy for providers and consumers to get wrapped up and carried away in paranoid fantasies about doomsday scenarios of terrorists attacking and crippling the entire utility grid and ex-boy/girlfriends stalking you by accessing your energy usage data from your smart meter (just two of the many doomsday scenarios, use your imagination or read Cyber War for more). In all reality though, these extreme situations can and will happen at some point if the utility industry does not implement measures to protect their critical infrastructure and protect their customer's personal identification information. Let's see what the experts had to say...
Session 1 (Day 2): Cybersecurity Requirements: Does Compliance Really Equal Security?
Panelists: Keith Porterfield (Moderator, Georgia System Operations Corp.), Annabelle Lee (Electric Power Research Institute), Lynne Ellyn (DTE Energy), Chris Villarreal (CA PUC), Anup Goyal (AT&T)
As I mentioned yesterday, I am currently learning about Smart Grid cybersecurity in my Energy Communications class, so I was really excited to hear from industry experts about the current issues and challenges in utility cybersecurity. This panel, which debated if simply complying with cybersecurity requirements actually protects critical infrastructure networks, largely agreed that compliance does not equal adequate security. So, compliance is important: you have to start somewhere, and high level cybersecurity guidelines or requirements are definitely necessary. However, each utility provider must identify its own unique risks and vulnerabilities, then build upon industry-wide compliance requirements to develop a dynamic, tailored end-to-end solution. Utilities need to learn from the lessons of the past--like the infamous Stuxnet worm situation--that attackers can just as easily come from an internal, "under the radar" source as they can swoop in from beyond the balancing authority in the form of a terrorist attack or full scale Cyber War. The new cybersecurity buzz-term is "Advanced Persistent Threats" which is a very realistic description--the threats are indeed highly advanced and constantly evolving. The panelist from DTE (Ellyn, who I found to be extremely interesting throughout the discussion) argued that not only is a focus on just prevention insufficient, but it is probably impossible. Therefore, utilities need to focus on anticipating and detecting threats, and reacting appropriately. Compliance with standards and regulations is not a one-time fix-all, it will be a continuous process. A great comment to illustrate this point was, "hackers do not have a checklist." Utilities cannot just expect to check off compliance measures, sit back, and wait for a disaster to occur (we all know it is not "if," but "when"). Compliance requirements that were implemented today but developed last year are not going to protect utilities (or telecom for that matter) from tomorrow's threats. One issue that is quite specific to the utility industry--that I find particularly interesting--is that much of the utility infrastructure is very old, 30-50 years old in some cases. How do you protect these assets from cyber attacks? How do you make sure analog, previous generation equipment does not create an entry point for attackers? In some cases, is analog infrastructure more secure than the smart grid? If so, will utilities delay or reject grid modernization? These are definitely questions that are troubling the industry right now, and it will be interesting to see the direction that utility providers take to ensure their critical assets are protected. Finally, utilities, regulators and vendors/suppliers need to foster a culture of cybersecurity, where the harsh realities of cyber attack are understood but there are ample incentives and opportunities to develop effective, dynamic solutions.
Session 2 (Day 2): Cybersecurity Overload: Meeting the Challenges of Implementation and Communication
Panelists: Michael Hyland (Moderator, American Public Power Association), Troy West (Cleco Corporation), Robert McClanahan (Arkansas Electric Cooperative), John Roukema (Silicon Valley Power), Tim Roxey (NERC), Paul De Martini (Cisco Systems)
I was extremely engaged in this panel as it addressed telecom cybersecurity issues and included panelists from small electric providers (and a cooperative!). This session addressed the challenge that utilities face in dealing with the impending explosion of "smart" devices and subsequent explosion and imposition of regulatory requirements--I think of this like the explosion of smartphones in the wireless industry and the subsequent explosion of cybersecurity fears. I really enjoyed the panelist from the electric cooperative (McClanahan), who commented that the greatest challenge to utilities besides trying to predict threats is trying to predict what the regulators will do next! Sir, we can relate in the telecom industry, where regulatory uncertainty is especially burdensome for the small providers. Basically, the onslaught of cybersecurity threats is only a fraction of the concerns--timely access to accurate information about threats and ongoing regulatory uncertainty greatly contribute to the overall cybersecurity anxiety attack. Disseminating information about attacks is particularly tricky because there are different security clearance levels for different types of information. One panelist candidly pointed out that some utility companies might not even have someone on staff who can get security clearance. According to Roxey (from NERC, another very engaging panelist), information sharing is extremely important but ultimately very difficult. Regarding telecom's role in utility cybersecurity, it is important to understand that cybersecurity is a threat for everyone. I am interested in learning more about the potential liabilities that a telecom company who provides service to utilities may face in situations where a network is breached resulting in an attack on the grid. I imagine this is partially why many utility providers are reluctant to trust commercial telecom providers--but--telecom providers have their own set of parallel cybersecurity challenges as well, where no telecom provider can safely leave any part of its network vulnerable to attack. There is indeed some fascinating interdependency between telecom and utilities in the cybersecurity arena. My favorite comment from this panel, by McClanahan, was "I don't have warfighters on my staff." In the face of a significant national security cyber threat, what role does a utility have to protect its assets and beyond? Do all utilities need to become national security mercenaries just because they are vulnerable to threats that could trigger a massive attack to the national grid infrastructure? Definitely some good food for thought here... I have no doubt that these are the precise issues that keep many utility managers and regulators awake at night.
Session 3 (Day 2): Managing the Mounds of Data: Get Ready for the New Energy Information Marketplace
Panelists: David Owens (Moderator, Edison Electric Institute), Lillie Coney (Electronic Privacy Information Center), Robin Lunt (NARUC), Mark Carpenter (Oncor), Rona Newmark (EMC Corp.), Kevin Messner (Association of Home Appliance Manufacturers)
I was very impressed by this panel--it ended up being the surprise hit of the summit for me. I am actually planning to continue this topic in a future post, because there is some research that I want to do to become more educated about telecom's Customer Proprietary Network Information ("CPNI") requirements and if they would be a good model for utilities to use going forward. This session was an extremely lively debate about how to ensure privacy and protection for utility customer information. There are increasing concerns that the Smart Grid will enable all kinds of malicious behavior if bad actors get ahold of Personally Indentifiable Information ("PII"). The common stereotype is the stalker who gets his or her hands on smart meter data and can then figure out when his or her prey is at home and what they are doing at every second. Although this scenario is not outside the scope of reality, if a stalker has access to smart meter information then they are probably already breaching the victim's privacy in some other way--smart meter data might not really add anything profound. There are clearly many more concerns in this topic, but the "stalker scenario" is definitely the most colorful and common example of smart meter privacy fears. There were some....*radical*... suggestions thrown around on this panel (that the government should require the equivalent of a "driver's license" for all Internet users, and each state should have its own set of data privacy regulations), and I kept thinking to myself "Isn't there some requirement in telecom that makes customer information protection really simple and straightforward?" Yes- CPNI. For some really rough background information, CPNI requirements were a priority for the FCC since 1998, but became reality after a "pretexting scandal" in 2006. Basically, CPNI requirements:
My Final Thoughts:
I really enjoyed this conference and I met many interesting people, and I hope to attend and participate in future smart grid policy conferences. Coming from the telecom world almost exclusively, I gained a tremendous amount of knowledge about the utilities industry. There are so many topics that I hope to learn more about and monitor as the smart grid modernization efforts progress. I will definitely continue studying the overlays between telecom and utilities in the Smart Grid arena, and I intend to spend some time in the near future learning more about the utility regulatory process in general.
Many thanks to the Utilities Telecom Council for the wonderful opportunity to attend this conference!
Cassandra Heyne
ruraltelecommentary@gmail.com
Session 1 (Day 2): Cybersecurity Requirements: Does Compliance Really Equal Security?
Panelists: Keith Porterfield (Moderator, Georgia System Operations Corp.), Annabelle Lee (Electric Power Research Institute), Lynne Ellyn (DTE Energy), Chris Villarreal (CA PUC), Anup Goyal (AT&T)
As I mentioned yesterday, I am currently learning about Smart Grid cybersecurity in my Energy Communications class, so I was really excited to hear from industry experts about the current issues and challenges in utility cybersecurity. This panel, which debated if simply complying with cybersecurity requirements actually protects critical infrastructure networks, largely agreed that compliance does not equal adequate security. So, compliance is important: you have to start somewhere, and high level cybersecurity guidelines or requirements are definitely necessary. However, each utility provider must identify its own unique risks and vulnerabilities, then build upon industry-wide compliance requirements to develop a dynamic, tailored end-to-end solution. Utilities need to learn from the lessons of the past--like the infamous Stuxnet worm situation--that attackers can just as easily come from an internal, "under the radar" source as they can swoop in from beyond the balancing authority in the form of a terrorist attack or full scale Cyber War. The new cybersecurity buzz-term is "Advanced Persistent Threats" which is a very realistic description--the threats are indeed highly advanced and constantly evolving. The panelist from DTE (Ellyn, who I found to be extremely interesting throughout the discussion) argued that not only is a focus on just prevention insufficient, but it is probably impossible. Therefore, utilities need to focus on anticipating and detecting threats, and reacting appropriately. Compliance with standards and regulations is not a one-time fix-all, it will be a continuous process. A great comment to illustrate this point was, "hackers do not have a checklist." Utilities cannot just expect to check off compliance measures, sit back, and wait for a disaster to occur (we all know it is not "if," but "when"). Compliance requirements that were implemented today but developed last year are not going to protect utilities (or telecom for that matter) from tomorrow's threats. One issue that is quite specific to the utility industry--that I find particularly interesting--is that much of the utility infrastructure is very old, 30-50 years old in some cases. How do you protect these assets from cyber attacks? How do you make sure analog, previous generation equipment does not create an entry point for attackers? In some cases, is analog infrastructure more secure than the smart grid? If so, will utilities delay or reject grid modernization? These are definitely questions that are troubling the industry right now, and it will be interesting to see the direction that utility providers take to ensure their critical assets are protected. Finally, utilities, regulators and vendors/suppliers need to foster a culture of cybersecurity, where the harsh realities of cyber attack are understood but there are ample incentives and opportunities to develop effective, dynamic solutions.
Session 2 (Day 2): Cybersecurity Overload: Meeting the Challenges of Implementation and Communication
Panelists: Michael Hyland (Moderator, American Public Power Association), Troy West (Cleco Corporation), Robert McClanahan (Arkansas Electric Cooperative), John Roukema (Silicon Valley Power), Tim Roxey (NERC), Paul De Martini (Cisco Systems)
I was extremely engaged in this panel as it addressed telecom cybersecurity issues and included panelists from small electric providers (and a cooperative!). This session addressed the challenge that utilities face in dealing with the impending explosion of "smart" devices and subsequent explosion and imposition of regulatory requirements--I think of this like the explosion of smartphones in the wireless industry and the subsequent explosion of cybersecurity fears. I really enjoyed the panelist from the electric cooperative (McClanahan), who commented that the greatest challenge to utilities besides trying to predict threats is trying to predict what the regulators will do next! Sir, we can relate in the telecom industry, where regulatory uncertainty is especially burdensome for the small providers. Basically, the onslaught of cybersecurity threats is only a fraction of the concerns--timely access to accurate information about threats and ongoing regulatory uncertainty greatly contribute to the overall cybersecurity anxiety attack. Disseminating information about attacks is particularly tricky because there are different security clearance levels for different types of information. One panelist candidly pointed out that some utility companies might not even have someone on staff who can get security clearance. According to Roxey (from NERC, another very engaging panelist), information sharing is extremely important but ultimately very difficult. Regarding telecom's role in utility cybersecurity, it is important to understand that cybersecurity is a threat for everyone. I am interested in learning more about the potential liabilities that a telecom company who provides service to utilities may face in situations where a network is breached resulting in an attack on the grid. I imagine this is partially why many utility providers are reluctant to trust commercial telecom providers--but--telecom providers have their own set of parallel cybersecurity challenges as well, where no telecom provider can safely leave any part of its network vulnerable to attack. There is indeed some fascinating interdependency between telecom and utilities in the cybersecurity arena. My favorite comment from this panel, by McClanahan, was "I don't have warfighters on my staff." In the face of a significant national security cyber threat, what role does a utility have to protect its assets and beyond? Do all utilities need to become national security mercenaries just because they are vulnerable to threats that could trigger a massive attack to the national grid infrastructure? Definitely some good food for thought here... I have no doubt that these are the precise issues that keep many utility managers and regulators awake at night.
Session 3 (Day 2): Managing the Mounds of Data: Get Ready for the New Energy Information Marketplace
Panelists: David Owens (Moderator, Edison Electric Institute), Lillie Coney (Electronic Privacy Information Center), Robin Lunt (NARUC), Mark Carpenter (Oncor), Rona Newmark (EMC Corp.), Kevin Messner (Association of Home Appliance Manufacturers)
I was very impressed by this panel--it ended up being the surprise hit of the summit for me. I am actually planning to continue this topic in a future post, because there is some research that I want to do to become more educated about telecom's Customer Proprietary Network Information ("CPNI") requirements and if they would be a good model for utilities to use going forward. This session was an extremely lively debate about how to ensure privacy and protection for utility customer information. There are increasing concerns that the Smart Grid will enable all kinds of malicious behavior if bad actors get ahold of Personally Indentifiable Information ("PII"). The common stereotype is the stalker who gets his or her hands on smart meter data and can then figure out when his or her prey is at home and what they are doing at every second. Although this scenario is not outside the scope of reality, if a stalker has access to smart meter information then they are probably already breaching the victim's privacy in some other way--smart meter data might not really add anything profound. There are clearly many more concerns in this topic, but the "stalker scenario" is definitely the most colorful and common example of smart meter privacy fears. There were some....*radical*... suggestions thrown around on this panel (that the government should require the equivalent of a "driver's license" for all Internet users, and each state should have its own set of data privacy regulations), and I kept thinking to myself "Isn't there some requirement in telecom that makes customer information protection really simple and straightforward?" Yes- CPNI. For some really rough background information, CPNI requirements were a priority for the FCC since 1998, but became reality after a "pretexting scandal" in 2006. Basically, CPNI requirements:
- Apply to ALL communications providers
- Carry serious consequences for noncompliance
- Serve as a compliance guideline, but encourage providers to tailor additional measures specific to their businesses
- Encourage providers to go way above and beyond the minimum requirements to protect customer information
My Final Thoughts:
I really enjoyed this conference and I met many interesting people, and I hope to attend and participate in future smart grid policy conferences. Coming from the telecom world almost exclusively, I gained a tremendous amount of knowledge about the utilities industry. There are so many topics that I hope to learn more about and monitor as the smart grid modernization efforts progress. I will definitely continue studying the overlays between telecom and utilities in the Smart Grid arena, and I intend to spend some time in the near future learning more about the utility regulatory process in general.
Many thanks to the Utilities Telecom Council for the wonderful opportunity to attend this conference!
Cassandra Heyne
ruraltelecommentary@gmail.com
Monday, April 11, 2011
Day 1 of UTC Smart Grid Policy Summit: Perspectives from a Utility Newcomer
The Utilities Telecom Council 2011 Smart Grid Policy Summit marked my first public foray on the utilities industry, and I am pleased to report that my interests in the Smart Grid are still very much alive and well. For some personal background, I became interested in the Smart Grid last summer when I was assigned to do some research at my previous job about claims that smart meters were causing harmful interference to wireless devices (security alarms, garage door openers, etc.). This took me on a whirlwind tour of smart meter controversies from the consumer perspective-- EMF safety concerns, personal energy usage information privacy threats, wireless interference in the unlicensed 900 MHz ISM band, fears that aliens would invade homes through smart meters... You get the idea--consumers have some wild imaginations! Anyway, some of my research in this project was focused on using licensed vs. unlicensed airwaves for smart meters, which brought me to my next smart grid project for my Wireless Communications class last fall. In this project, I continued to research issues surrounding private vs. commercial wireless networks and licensed vs. unlicensed spectrum for smart grid and smart meter networks. For the 2011 spring semester, University of Colorado started offering a new class on Energy Communications Networks, which I am now taking and really enjoying. This brings me to my current project, a research paper on the potential for rural electric cooperatives and rural telecom companies to collaborate on smart grid projects (which I have written about here). During my research I came across the UTC Smart Grid Policy Summit, which I noticed was 2 blocks from my house and at my favorite hotel in the city--so I just had to sign up! Anyway, on to the Summit. I was particularly interested in hearing and learning more about the following topics, which were basically all discussed during today's sessions:
Keynote Speaker: Joe Rigby, Pepco CEO
The Summit opened with an optimistic yet honest overview of Pepco's smart grid deployment efforts. Rigby emphasized the importance of taking a cautious, staged deployment of smart meter functionalities to prevent widespread misinformation about the transition from the utility of the last 100 years to the utility of the future. Rigby discussed the importance of collaborating with all stakeholders and taking advantage of all channels to engage and educate consumers on the value of the smart grid. So, what is the value of the smart grid anyway? The value proposition must be communicated in a way that engages consumers, and several clear smart grid values include: improved energy reliability, greater consumer understanding of energy usage, seamless integration of renewables and electric vehicles, and reduced operating costs that translate to customer savings. The challenges facing smart grid deployment are also significant: resetting consumer expectations, Cyber Security ("a war that will never be over"), data privacy, meter accuracy, perceived EMF/RF safety concerns, securing sufficient bandwidth for utilities, and forging relationships with new partners, suppliers and competitors. Overall, Rigby's speech was very informative and it set the tone for the day as many of these issues were discussed in greater detail by the panelists in the following sessions.
Session 1: What's Next in Smart Grid Policy: Leaders Forecast the Big Issues Ahead
Panelists: William Moroney (Moderator, UTC), Philip Moeller (FERC), Eddie Lazarus (FCC), Henry Kenchington (US Dept. of Energy), Tony Clark (NARUC and North Dakota PSC)
The purpose of this session was to identify key smart grid policy issues and discuss how policy decisions will impact different aspects of smart grid deployment and implementation. From my telecom policy background perspective, this session was very valuable to me because I was able to learn about the utility policy process and pending issues directly from utility policymakers. The panelist from the FCC kept me in my comfort zone by discussing the smart grid initiative in the National Broadband Plan and a recent NOI about network reliability (which I plan to read and discuss soon)--adding that utilities have traditionally been reluctant to work with commercial telecom providers due to network reliability issues (a barrier that I hope to see broken by rural electric co-op/rural telecom provider collaboration). The DOE panelist discussed Recovery Act smart grid projects that are underway, saying that these initiatives will hopefully help remove some of the uncertainty about smart grid benefits, costs and risks. The remarks that really stuck with me were from Tony Clark of NARUC and North Dakota PSC (a rural perspective!), who emphasized that all utilities--telecom included--are converging, which will require major educational efforts for both consumers and regulators. He added that cost is the greatest challenge for states, and used the example of USF reform and its potential cost burden to states. The best question asked to the panel was "What problems does the smart grid really solve?" From the consumer perspective, there needs to be a clear answer to this question or consumers will not accept the smart grid. A great example is broadband--millions of Americans still do not adopt broadband even though they have access simply because they do not understand the relevance or value of broadband. Interestingly, the smart grid may actually help some broadband non-adopters to "see the light," and therefore help increase broadband adoption along the road to achieving broader smart grid goals--but it will require concentrated efforts by all smart grid stakeholders to educate consumers. Finally, the panelists discussed how important it is for consumers to educate themselves on the values of the smart grid, which requires specific, tailored information from reliable and trustworthy sources--in voices that are loud and reliable enough to overpower the widespread misinformation about the smart grid.
Session 2: Managing the Technology Mix: Building, Buying or Sharing Smarter Utility Communications Networks
Panelists: Mike Oldak (Moderator, UTC), Karl Nebbia (NTIA), Julius Knapp (FCC), Jeff Nichols (Sempra Energy Utilities), Mark Madden (Alcatel-Lucent), Rilck Noel (Verizon), Narasimha Chari (Tropos Networks)
Due to my past research projects about wireless networks and the smart grid, I was definitely very excited about this panel--and it did not disappoint. Basically, utilities need spectrum. There will be an estimated 1 billion "smart devices" in the near future that are all communicating with each other and the utility--if this doesn't convince you that utilities and telecom are converging, I don't know what will! The obvious question is: where will utilities get this spectrum? Wireless providers, the government and broadcasters are already fighting like rabid dogs over every last megahertz--everyone wants it, everyone has valid reasons to want it, and not everyone will end up with beachfront spectrum property. The FCC panelist added that there are no more "vacant lots," and difficult, comprehensive spectrum management efforts are definitely necessary. Like rural telecom providers, utilities are often disadvantaged in spectrum auctions, and sharing arrangements can be difficult to acquire and negotiate. Rural utilities are especially unlikely to get their own licensed spectrum. The Alcatel-Lucent panelist added that each utility faces specific geographic, demographic and infrastructure needs and challenges. Basically, ensuring that utilities have access to communication network assets will require creativity, imagination, money, and will include some conflict and drama (Rural telcos- how can you turn this into a profitable business opportunity? Think about it!) Some promising opportunities exist in both the TV White Spaces and the 700 MHz Public Safety spectrum, pending regulatory approval. Finally, I was intrigued by the comment that utilities should not "put all their eggs in one basket" in terms of communications networks--they need multiple types of network technologies with different levels of reliability and different options for redundancy. I see some real opportunities for rural telecom providers to step up with their reliable and high quality fiber networks to collaborate with utilities to meet some of these critical communications network needs. Rural electric co-ops probably cannot afford to build entire networks from scratch--with redundancy--in terms of both time and money. Ultimately, there is no single solution that will work everywhere and appeal to all utilities, but communications networks are literally the foundation for which the smart grid will grow and flourish--and they have to come from somewhere.
Lunch with Rep. Rick Boucher, and Afternoon Sessions on Building Customer Acceptance and Interoperability Standards
Following the two fascinating morning sessions was an equally fascinating lunchtime address by former Representative Boucher (D-VA), a true leader and expert on energy and technology. Boucher recalled a story that I either heard or read recently: what would Edison and Bell say if they saw the state of the energy and telecom industry today? Bell's mind would be blown by how telecom has evolved in the last 100 years, but Edison would find the energy industry basically the same as when he left it. Boucher emphasized the many benefits of the smart grid, from demand response to a burgeoning new home appliance market to the impact on the environment. He also highlighted the challenges--financial cost of upgrading the entire utility industry, consumer criticism of smart meters, finding adequate spectrum for networks, and developing interoperability standards. He discussed the controversial debate about the D Block and the potential for using the TV White Spaces in Rural Areas. As Vilsack's speech at the NTCA Legislative and Policy conference was empowering for rural telecom advocates, Boucher's speech was equally empowering for smart grid advocates.
The last two sessions of the day-- Building Consumer Acceptance and Interoperability Standards--were interesting as well and full of lively debate, but as I am pressed for time right now (and exhausted), I will end this post before it gets any longer. Tomorrow will be very exciting for me--most of the sessions are about Cyber Security, a topic that I am studying in my Energy Communications Network class at this very moment. Ever since I read Cyber War by Richard Clarke last summer, I have been pretty obsessed with Cyber Security, so I am sure to find tomorrow's sessions extremely valuable and informative.
One last thing--today was also my first public foray into the wonderful world of Twitter, and it was fun to share my thoughts about the conference via social media. I am still hoping that more of my readers will "follow" @RuralTelComment on Twitter!
Cassandra Heyne
ruraltelecommentary@gmail.com
- The licensed vs. unlicensed spectrum debate
- How to get utilities and telecom providers to collaborate effectively and with mutual trust
- Mitigating the often unreasonable consumer fears about smart meters to ensure a smooth transition to the utility industry of the future
- Any issues, challenges and accomplishments specific to rural smart grid deployment--and is this all important from a rural telecom perspective?
Keynote Speaker: Joe Rigby, Pepco CEO
The Summit opened with an optimistic yet honest overview of Pepco's smart grid deployment efforts. Rigby emphasized the importance of taking a cautious, staged deployment of smart meter functionalities to prevent widespread misinformation about the transition from the utility of the last 100 years to the utility of the future. Rigby discussed the importance of collaborating with all stakeholders and taking advantage of all channels to engage and educate consumers on the value of the smart grid. So, what is the value of the smart grid anyway? The value proposition must be communicated in a way that engages consumers, and several clear smart grid values include: improved energy reliability, greater consumer understanding of energy usage, seamless integration of renewables and electric vehicles, and reduced operating costs that translate to customer savings. The challenges facing smart grid deployment are also significant: resetting consumer expectations, Cyber Security ("a war that will never be over"), data privacy, meter accuracy, perceived EMF/RF safety concerns, securing sufficient bandwidth for utilities, and forging relationships with new partners, suppliers and competitors. Overall, Rigby's speech was very informative and it set the tone for the day as many of these issues were discussed in greater detail by the panelists in the following sessions.
Session 1: What's Next in Smart Grid Policy: Leaders Forecast the Big Issues Ahead
Panelists: William Moroney (Moderator, UTC), Philip Moeller (FERC), Eddie Lazarus (FCC), Henry Kenchington (US Dept. of Energy), Tony Clark (NARUC and North Dakota PSC)
The purpose of this session was to identify key smart grid policy issues and discuss how policy decisions will impact different aspects of smart grid deployment and implementation. From my telecom policy background perspective, this session was very valuable to me because I was able to learn about the utility policy process and pending issues directly from utility policymakers. The panelist from the FCC kept me in my comfort zone by discussing the smart grid initiative in the National Broadband Plan and a recent NOI about network reliability (which I plan to read and discuss soon)--adding that utilities have traditionally been reluctant to work with commercial telecom providers due to network reliability issues (a barrier that I hope to see broken by rural electric co-op/rural telecom provider collaboration). The DOE panelist discussed Recovery Act smart grid projects that are underway, saying that these initiatives will hopefully help remove some of the uncertainty about smart grid benefits, costs and risks. The remarks that really stuck with me were from Tony Clark of NARUC and North Dakota PSC (a rural perspective!), who emphasized that all utilities--telecom included--are converging, which will require major educational efforts for both consumers and regulators. He added that cost is the greatest challenge for states, and used the example of USF reform and its potential cost burden to states. The best question asked to the panel was "What problems does the smart grid really solve?" From the consumer perspective, there needs to be a clear answer to this question or consumers will not accept the smart grid. A great example is broadband--millions of Americans still do not adopt broadband even though they have access simply because they do not understand the relevance or value of broadband. Interestingly, the smart grid may actually help some broadband non-adopters to "see the light," and therefore help increase broadband adoption along the road to achieving broader smart grid goals--but it will require concentrated efforts by all smart grid stakeholders to educate consumers. Finally, the panelists discussed how important it is for consumers to educate themselves on the values of the smart grid, which requires specific, tailored information from reliable and trustworthy sources--in voices that are loud and reliable enough to overpower the widespread misinformation about the smart grid.
Session 2: Managing the Technology Mix: Building, Buying or Sharing Smarter Utility Communications Networks
Panelists: Mike Oldak (Moderator, UTC), Karl Nebbia (NTIA), Julius Knapp (FCC), Jeff Nichols (Sempra Energy Utilities), Mark Madden (Alcatel-Lucent), Rilck Noel (Verizon), Narasimha Chari (Tropos Networks)
Due to my past research projects about wireless networks and the smart grid, I was definitely very excited about this panel--and it did not disappoint. Basically, utilities need spectrum. There will be an estimated 1 billion "smart devices" in the near future that are all communicating with each other and the utility--if this doesn't convince you that utilities and telecom are converging, I don't know what will! The obvious question is: where will utilities get this spectrum? Wireless providers, the government and broadcasters are already fighting like rabid dogs over every last megahertz--everyone wants it, everyone has valid reasons to want it, and not everyone will end up with beachfront spectrum property. The FCC panelist added that there are no more "vacant lots," and difficult, comprehensive spectrum management efforts are definitely necessary. Like rural telecom providers, utilities are often disadvantaged in spectrum auctions, and sharing arrangements can be difficult to acquire and negotiate. Rural utilities are especially unlikely to get their own licensed spectrum. The Alcatel-Lucent panelist added that each utility faces specific geographic, demographic and infrastructure needs and challenges. Basically, ensuring that utilities have access to communication network assets will require creativity, imagination, money, and will include some conflict and drama (Rural telcos- how can you turn this into a profitable business opportunity? Think about it!) Some promising opportunities exist in both the TV White Spaces and the 700 MHz Public Safety spectrum, pending regulatory approval. Finally, I was intrigued by the comment that utilities should not "put all their eggs in one basket" in terms of communications networks--they need multiple types of network technologies with different levels of reliability and different options for redundancy. I see some real opportunities for rural telecom providers to step up with their reliable and high quality fiber networks to collaborate with utilities to meet some of these critical communications network needs. Rural electric co-ops probably cannot afford to build entire networks from scratch--with redundancy--in terms of both time and money. Ultimately, there is no single solution that will work everywhere and appeal to all utilities, but communications networks are literally the foundation for which the smart grid will grow and flourish--and they have to come from somewhere.
Lunch with Rep. Rick Boucher, and Afternoon Sessions on Building Customer Acceptance and Interoperability Standards
Following the two fascinating morning sessions was an equally fascinating lunchtime address by former Representative Boucher (D-VA), a true leader and expert on energy and technology. Boucher recalled a story that I either heard or read recently: what would Edison and Bell say if they saw the state of the energy and telecom industry today? Bell's mind would be blown by how telecom has evolved in the last 100 years, but Edison would find the energy industry basically the same as when he left it. Boucher emphasized the many benefits of the smart grid, from demand response to a burgeoning new home appliance market to the impact on the environment. He also highlighted the challenges--financial cost of upgrading the entire utility industry, consumer criticism of smart meters, finding adequate spectrum for networks, and developing interoperability standards. He discussed the controversial debate about the D Block and the potential for using the TV White Spaces in Rural Areas. As Vilsack's speech at the NTCA Legislative and Policy conference was empowering for rural telecom advocates, Boucher's speech was equally empowering for smart grid advocates.
The last two sessions of the day-- Building Consumer Acceptance and Interoperability Standards--were interesting as well and full of lively debate, but as I am pressed for time right now (and exhausted), I will end this post before it gets any longer. Tomorrow will be very exciting for me--most of the sessions are about Cyber Security, a topic that I am studying in my Energy Communications Network class at this very moment. Ever since I read Cyber War by Richard Clarke last summer, I have been pretty obsessed with Cyber Security, so I am sure to find tomorrow's sessions extremely valuable and informative.
One last thing--today was also my first public foray into the wonderful world of Twitter, and it was fun to share my thoughts about the conference via social media. I am still hoping that more of my readers will "follow" @RuralTelComment on Twitter!
Cassandra Heyne
ruraltelecommentary@gmail.com
Thursday, April 7, 2011
Rural TeleCommentary is NOW on TWITTER!
Click Here to Follow Rural TeleCommentary on Twitter! (@RuralTelComment)
Things move fast in the tech industry so I didn't see any point in holding off the inevitable for a few more weeks or months. I signed up for Twitter yesterday and so far I really like it. I am finding it to be very useful to get industry news from a wide variety of sources, and I think it will help me simplify my social networking a little. Hopefully, it will help me bring in some new readers to Rural TeleCommentary. I've been following a number of associations, news outlets, etc. on Facebook for awhile now, but I'm going to transition to using Twitter exclusively for "professional" social networking and Facebook exclusively for entertainment. Plus, I don't think my Facebook friends really qualify as a target audience for articles on ICC arbitrage and whatnot.
On Twitter, I plan to:
Have a great weekend!
Cassandra Heyne
ruraltelecommentary@gmail.com
Things move fast in the tech industry so I didn't see any point in holding off the inevitable for a few more weeks or months. I signed up for Twitter yesterday and so far I really like it. I am finding it to be very useful to get industry news from a wide variety of sources, and I think it will help me simplify my social networking a little. Hopefully, it will help me bring in some new readers to Rural TeleCommentary. I've been following a number of associations, news outlets, etc. on Facebook for awhile now, but I'm going to transition to using Twitter exclusively for "professional" social networking and Facebook exclusively for entertainment. Plus, I don't think my Facebook friends really qualify as a target audience for articles on ICC arbitrage and whatnot.
On Twitter, I plan to:
- Announce and post links to new blog articles (great for my readers who do not get direct e-mails from me)
- Post links to interesting and applicable articles and news about the rural telecom industry
- Provide colorful commentary about telecom topics, in 140 words or less.
Have a great weekend!
Cassandra Heyne
ruraltelecommentary@gmail.com
Wednesday, April 6, 2011
FCC's Intercarrier Comp Workshop Stimulates Debate About Traffic Pumping, Phantom Traffic and VoIP
Despite the usual "technical difficulties" with the FCC's streaming video, today's ICC Workshop was an extremely insightful look into the key issues and controversies associated with phantom traffic, access stimulation, VoIP access charges and revenue recovery mechanisms. There was no shortage of lively debate, and it was very informative to watch industry leaders hash out different perspectives regarding how these issues should be addressed with FCC policy. From free conference calling companies to state utility boards to rural associations, there was little consensus overall, but I think each participant contributed valuable arguments that will hopefully play into the FCC's ultimate decisions. I'm not going to do a point-by-point/he-said-she-said breakdown of the entire Workshop (which would be impossible since the FCC video feed freezes approximately every 30 seconds, plus many of the issued discussed today are mentioned in my comment summaries), but there are a few issues that I would like to discuss within each of the three sessions from the Workshop.
Access Stimulation & Phantom Traffic
Panel Participants: Krista Tanner (Iowa Utilities Board), Dave Schornak (TekStar Communications), David Erickson (FreeConferenceCall.com), David Frankel (ZipDK), Jonathan Banks (USTelecom), Melissa Newman (Qwest), and Michael Romano (NTCA)
This session became rather tense at some points, as there are clearly many strong and contradictory opinions regarding the severity and consequences of access stimulation and phantom traffic. The simple fact that the panel included members from free conference calling companies really "pumped" the level of tension, pun intended. The discussion that I found particularly interesting was whether the FCC's policy towards these issues should be crafted based on the "worst case scenario"--in this case, the worst of the bad actors. Iowa has clearly had some significant issues with traffic pumping, which has left the IUB reeling in the wake of a long and painful proceeding that resulted in the High Volume Access Trigger and an IUB that is intolerant of anything that resembles traffic pumping (legitimate or not). The IUB doesn't even think it is necessary to differentiate between legitimate high volume traffic increases and intentional traffic pumping, because the bottom line is that it makes no difference what the calls are for if the rates are not adjusted to meet the higher volume. NTCA's Romano argues that Iowa is an extreme case and that broader policy decisions should probably not be based on the worst bad actors. Both of these points were discussed in the comments I summarized, but it was quite informative for me to listen to a live debate about traffic pumping policy. My bottom line here is that this type of situation should never have happened in the first place in our industry, but it has happened and it is now time for the FCC to deal with it in a way that prevents continued rate structure abuse.
VoIP Access Charges
Panel Participants: Kathleen Grillo (Verizon), Eric Einhorn (Windstream), Julie Laine (Time Warner), Brendan Kasper (Vonage), Paul Gallant (MF Global/Washington Research Group), and Peter McGowan (NY State Department of Public Service)
As I mentioned in my previous post, this issue represents an ugly battle between traditional voice telecommunications service providers and VoIP providers, and I do not see a resolution where at least one side isn't going to have to make a significant sacrifice in both finance and pride. One thing I noticed in the pro-VoIP comments was the argument that since the future of voice communications is IP-based and will move away from a per-minute cost recovery model, VoIP providers should not be subject to an "antiquated" access charge regime. However, I don't think the real issue is implementing an antiquated access charge regime--it is bringing stability, predictability and certainty to an extremely volitile and unstable area of FCC policy. Yes, voice telecom is moving towards IP and will eventually move away from per-minute structures. But until that time comes, there cannot continue to be a "Wild West" attitude towards VoIP access charges. Continuing with this behavior will distort the industry, discourage investment, and cause untold financial harm in terms of litigation and lost revenue--and it literally makes the whole industry look bad. Nobody likes a free rider, whether it is that "friend" who always conveniently forgets his wallet when its time to pay for dinner or a company leaching off the investments that other companies have poured their souls and bank accounts into for the benefit of consumers. VoIP providers seem to be focusing on a non-issue (that ICC is antiquated and therefore should not apply), as is often the case in rulemaking proceedings, possibly in order to take the heat off the glaring fact many VoIP providers are cheating the system. It appears as though there is a high degree of consensus among telecom industry heavy-hitters (read: companies with lots of lobbyists), such as Verizon, Windstream and Time Warner, that there needs to be immediate action to put VoIP on an access charge structure--even the representative from Wall Street agreed that the current environment is bad from an investment perspective. Furthermore, creating artificial regulatory distinctions between VoIP and other traffic will perpetuate the issue and possible cause mass chaos as every provider will try to justify that their traffic is VoIP. The comment that really stuck with me from this panel was from Windstream: although the current access charge disputes are troubling, if the FCC does not act immediately there is a terrifying potential that the entire ICC access charge system will completely unravel and destabilize the industry--and then the FCC will really be faced with a challenge of epic proportions.
Developing a Recovery Mechanism
Panel Participants: John Rose (OPASTCO), Kenneth Mason (Frontier), Robert Quinn (AT&T, Charles McKee (Sprint-Nextel), Frank Louthan (Raymond James), and David Bergmann (NASUCA)
OK, so my attention span was really waning midway through this session, but there were a few points that definitely stood out--especially towards the end of the session when the focus turned specifically onto small family owned companies in Iowa. I want to commend Frank Louthan from Raymond James for pointing out some very informative rural perspectives throughout the session, but he really went to bat for small rural companies when the AT&T panelist asked "Does Iowa really need 200 small carriers?" Many of us from small companies know the ugly truth about the future--that we will not all survive. I have personally felt victimized by FCC staff who have asked me why all the small carriers don't just consolidate already. Anyway, Louthan responded to AT&T that this is indeed a very emotional issue and a large percentage of the small companies are family-owned--when you threaten to take away something that a family has spent several generations (100 or more years in some cases) building and maintaining, emotions will run high. Consolidation is a very, very bitter pill to swollow. Louthan discussed other RLEC cost recovery issues with great insight. He described how important it is for the FCC to act quickly to restore certainty to the industry, because many RLECs rely on lenders who are currently hesitant to invest in these companies. Furthermore, the uncertainty contributes to low valuation for RLECs--something that definitely needs to change before any of us will consider consolidating or selling our businesses to larger carriers. If the ICC and USF cost recovery issues are resolved with satisfaction, the valuation of RLECs will surely increase. If there is any continued/ongoing risk that RLECs will not be able to repay loans due to regulatory uncertainty, our companies will not only be under-valuated, but we will not be able to meet the FCC's goals for deploying broadband in rural areas. The whole situation is extremely circular, and if one node on the loop is broken the entire rural broadband deployment initiative will suffer tremendously--there is no built in protection ring here (FTTH joke).
I encourage you all to watch the workshop on http://reboot.fcc.gov/ when it is available. I thought it was really valuable to learn perspectives of all different areas of the industry on these ICC issues, and I look forward to the future workshops on USF reform. I thought the FCC did a great job of organizing a public opportunity for rural telecom providers to present their cases and make their voices heard on extremely critical topics.
I think I have done enough writing for this week, but I finally made a decision about Twitter and decided to join, so PLEASE FOLLOW RURAL TELECOMMENTARY ON TWITTER @RuralTelComment!
Next week I am attending the Utilities Telecom Council's Smart Grid Policy Summit! The UTC extended me a very generous student discount, which I gladly accepted. So look for Part 2 on my Smart Grid Series next week!
Cassandra Heyne
ruraltelecommentary@gmail.com
Access Stimulation & Phantom Traffic
Panel Participants: Krista Tanner (Iowa Utilities Board), Dave Schornak (TekStar Communications), David Erickson (FreeConferenceCall.com), David Frankel (ZipDK), Jonathan Banks (USTelecom), Melissa Newman (Qwest), and Michael Romano (NTCA)
This session became rather tense at some points, as there are clearly many strong and contradictory opinions regarding the severity and consequences of access stimulation and phantom traffic. The simple fact that the panel included members from free conference calling companies really "pumped" the level of tension, pun intended. The discussion that I found particularly interesting was whether the FCC's policy towards these issues should be crafted based on the "worst case scenario"--in this case, the worst of the bad actors. Iowa has clearly had some significant issues with traffic pumping, which has left the IUB reeling in the wake of a long and painful proceeding that resulted in the High Volume Access Trigger and an IUB that is intolerant of anything that resembles traffic pumping (legitimate or not). The IUB doesn't even think it is necessary to differentiate between legitimate high volume traffic increases and intentional traffic pumping, because the bottom line is that it makes no difference what the calls are for if the rates are not adjusted to meet the higher volume. NTCA's Romano argues that Iowa is an extreme case and that broader policy decisions should probably not be based on the worst bad actors. Both of these points were discussed in the comments I summarized, but it was quite informative for me to listen to a live debate about traffic pumping policy. My bottom line here is that this type of situation should never have happened in the first place in our industry, but it has happened and it is now time for the FCC to deal with it in a way that prevents continued rate structure abuse.
VoIP Access Charges
Panel Participants: Kathleen Grillo (Verizon), Eric Einhorn (Windstream), Julie Laine (Time Warner), Brendan Kasper (Vonage), Paul Gallant (MF Global/Washington Research Group), and Peter McGowan (NY State Department of Public Service)
As I mentioned in my previous post, this issue represents an ugly battle between traditional voice telecommunications service providers and VoIP providers, and I do not see a resolution where at least one side isn't going to have to make a significant sacrifice in both finance and pride. One thing I noticed in the pro-VoIP comments was the argument that since the future of voice communications is IP-based and will move away from a per-minute cost recovery model, VoIP providers should not be subject to an "antiquated" access charge regime. However, I don't think the real issue is implementing an antiquated access charge regime--it is bringing stability, predictability and certainty to an extremely volitile and unstable area of FCC policy. Yes, voice telecom is moving towards IP and will eventually move away from per-minute structures. But until that time comes, there cannot continue to be a "Wild West" attitude towards VoIP access charges. Continuing with this behavior will distort the industry, discourage investment, and cause untold financial harm in terms of litigation and lost revenue--and it literally makes the whole industry look bad. Nobody likes a free rider, whether it is that "friend" who always conveniently forgets his wallet when its time to pay for dinner or a company leaching off the investments that other companies have poured their souls and bank accounts into for the benefit of consumers. VoIP providers seem to be focusing on a non-issue (that ICC is antiquated and therefore should not apply), as is often the case in rulemaking proceedings, possibly in order to take the heat off the glaring fact many VoIP providers are cheating the system. It appears as though there is a high degree of consensus among telecom industry heavy-hitters (read: companies with lots of lobbyists), such as Verizon, Windstream and Time Warner, that there needs to be immediate action to put VoIP on an access charge structure--even the representative from Wall Street agreed that the current environment is bad from an investment perspective. Furthermore, creating artificial regulatory distinctions between VoIP and other traffic will perpetuate the issue and possible cause mass chaos as every provider will try to justify that their traffic is VoIP. The comment that really stuck with me from this panel was from Windstream: although the current access charge disputes are troubling, if the FCC does not act immediately there is a terrifying potential that the entire ICC access charge system will completely unravel and destabilize the industry--and then the FCC will really be faced with a challenge of epic proportions.
Developing a Recovery Mechanism
Panel Participants: John Rose (OPASTCO), Kenneth Mason (Frontier), Robert Quinn (AT&T, Charles McKee (Sprint-Nextel), Frank Louthan (Raymond James), and David Bergmann (NASUCA)
OK, so my attention span was really waning midway through this session, but there were a few points that definitely stood out--especially towards the end of the session when the focus turned specifically onto small family owned companies in Iowa. I want to commend Frank Louthan from Raymond James for pointing out some very informative rural perspectives throughout the session, but he really went to bat for small rural companies when the AT&T panelist asked "Does Iowa really need 200 small carriers?" Many of us from small companies know the ugly truth about the future--that we will not all survive. I have personally felt victimized by FCC staff who have asked me why all the small carriers don't just consolidate already. Anyway, Louthan responded to AT&T that this is indeed a very emotional issue and a large percentage of the small companies are family-owned--when you threaten to take away something that a family has spent several generations (100 or more years in some cases) building and maintaining, emotions will run high. Consolidation is a very, very bitter pill to swollow. Louthan discussed other RLEC cost recovery issues with great insight. He described how important it is for the FCC to act quickly to restore certainty to the industry, because many RLECs rely on lenders who are currently hesitant to invest in these companies. Furthermore, the uncertainty contributes to low valuation for RLECs--something that definitely needs to change before any of us will consider consolidating or selling our businesses to larger carriers. If the ICC and USF cost recovery issues are resolved with satisfaction, the valuation of RLECs will surely increase. If there is any continued/ongoing risk that RLECs will not be able to repay loans due to regulatory uncertainty, our companies will not only be under-valuated, but we will not be able to meet the FCC's goals for deploying broadband in rural areas. The whole situation is extremely circular, and if one node on the loop is broken the entire rural broadband deployment initiative will suffer tremendously--there is no built in protection ring here (FTTH joke).
I encourage you all to watch the workshop on http://reboot.fcc.gov/ when it is available. I thought it was really valuable to learn perspectives of all different areas of the industry on these ICC issues, and I look forward to the future workshops on USF reform. I thought the FCC did a great job of organizing a public opportunity for rural telecom providers to present their cases and make their voices heard on extremely critical topics.
I think I have done enough writing for this week, but I finally made a decision about Twitter and decided to join, so PLEASE FOLLOW RURAL TELECOMMENTARY ON TWITTER @RuralTelComment!
Next week I am attending the Utilities Telecom Council's Smart Grid Policy Summit! The UTC extended me a very generous student discount, which I gladly accepted. So look for Part 2 on my Smart Grid Series next week!
Cassandra Heyne
ruraltelecommentary@gmail.com
Monday, April 4, 2011
In the Matter of ICC Abuse and Arbitrage, A Battle Between Telcos and VoIP Ensues
Comments on Intercarrier Compensation Arbitrage Issues (Round 1 of the USF Reform NPRM comment cycle showdown) were due Friday, April 1st--no fooling unfortunately.
For your reference, this is in regards to:
On to the comments... I've chosen to read and summarize comments from the Independent Telephone & Telecommunications Alliance (ITTA); Joint comments by NECA, NTCA, OPASTCO, WTA, Eastern Rural Telecom, The Rural Alliance and The Rural Broadband Alliance; the Iowa Utilities Board; Blooston Rural Carriers; Vonage and Google (to get the perspective from the "dark side"). The comments are centered around three key issues from Section XV of the USF Reform NPRM:
Comments of the Independent Telephone & Telecommunications Alliance (ITTA):
ITTA urges the FCC to quickly adopt rules to prevent ICC abuse and arbitrage, adding that "abuse...is rampant throughout the country" (ITTA, pg. iii). Basically, if you use the PSTN, you need to pay. ITTA, an alliance of small and mid-sized telecommunications carriers, is very concerned about the increasing number of VoIP carriers who are withholding access payments, phantom traffic access avoidance schemes, and unreasonable rates resulting from access stimulation. Adopting rules to resolve these issues would restore certainty in the industry as well as create greater financial stability and predictability regarding ICC payments. These rules are necessary to implement before a broader ICC reform can be achieved, which is one of the FCC's goals for overall USF restructuring. ITTA argues that continued mischief in the ICC realm, such as access avoidance, is unacceptable and undermines the entire system. Although some parties argue that ICC itself is an outdated system, that does not justify making one's own rules (I can point to a lot of rules in this country that are "outdated" and "in need of reform," but that doesn't give any citizen the right to avoid the rules or devise their own personal variations just because they don't like the rules--if everyone did this our society would quickly crumble, which is clearly where the telecommunications ICC regime is headed without a quick resolution to ICC abuse coupled with effective enforcement mechanisms). ITTA points to the fact that VoIP providers are required to follow other rules such as E-911 and CALEA, where VoIP is clearly treated as equivalent to telecommunications service. It is simply bad policy to uphold a facade where VoIP traffic is treated differently than telecommunications traffic in some regulatory areas but the same in others, which will prevent investment and create unfair competitive advantages, as well as "condone the Wild West environment that characterizes intercarrier compensation today" (ITTA, p. 8). Regarding phantom traffic, ITTA supports the FCC's proposal to require calling party information in call signaling information no matter what technology the carrier uses (SS7, TDM, IP, etc). Furthermore, the FCC should be proactive about enforcing phantom traffic rules, which will ultimately help "eliminate cheaters and allow carriers to obtain fair compensation for use of their networks" (ITTA, p. v). Finally, ITTA insists that access stimulation is a violation of Section 201 by creating artificial demand and unreasonable rates. Overall, ITTA puts forth some very persuasive arguments about VoIP being functionally identical to PSTN traffic, and ITTA effectively illustrates the harm, risk and uncertainty that continued ICC abuse and arbitrage will cause to small and mid-sized carriers in rural areas if rules are not implemented as soon as possible.
Comments of NECA, NTCA, OPASTCO, WTA, ERTA, Rural Alliance, and Rural Broadband Alliance ("Rural Associations"):
The Rural Associations also agree that VoIP traffic should be subject to the same intercarrier compensation rates as PSTN traffic; specific and detailed call signaling requirements should be established to prevent phantom traffic; and reasonable rules should be implemented to prevent ill-gotten access stimulation revenue. Furthermore, the Rural Associations add that the FCC should consider developing rules to resolve refusal-to-pay situations to reduce the legal and financial burden on small carriers to recover revenue from non-paying carriers in court. The Rural Associations argue that ICC abuse and arbitrage cause ongoing and numerous billing disputes, complaints, litigation, an inefficient use of resources, and increased strain on the USF system. This amounts to significant regulatory uncertainty, and perpetuates the perception that the FCC has lost control of ICC altogether. The Rural Associations effectively disprove several common myths about VoIP: the myth that VoIP uses different technology for originating calls and therefore should be exempt from ICC; the myth that IP-enabled technologies deserve different regulatory treatment; and the myth that the use of "protocol conversion" in calls that originate on IP and terminate on the PSTN constitutes an "information service," which deserves ICC exemption. The Rural Associations argue that any differentiated treatment of VoIP in ICC constitutes discrimination, therefore VoIP should receive identical regulatory treatment as PSTN calls. Regarding phantom traffic, the Rural Associations believe that terminating carriers should be allowed to charge the highest rate to unidentified traffic as a penalty, which could become a very effective enforcement and prevention mechanism. I believe this would create a strong incentive for carriers to comply with call signaling information requirements. The threat of high costs and financial penalties is extremely powerful--I argued a few weeks ago that imposing data usage caps and overage fees would effectively deter some large-scale digital content piracy. Evading rules and fees is not nearly exciting or lucrative when the cost of the consequence increases beyond a certain threshold--the FCC needs to figure out what "penalty rate" would effectively prevent a considerable quantity of phantom traffic. Finally, the Rural Associations support reasonable rules to address access stimulation, but cautions the FCC to "distinguish between situations where traffic levels are artificially inflated and situations where traffic increases as a result of legitimate and much-needed economic activity in rural areas" (Rural Associations, pg. 32). There are many legitimate large-scale call centers located in rural areas, which should not be confused with intentional traffic pumping. Overall, I thought the Rural Association's arguments were very well developed and convincing, particularly the comments disproving that interconnected VoIP is fundamentally different than PSTN traffic, and the arguments about enforcing phantom traffic with financial penalties.
Comments of the Iowa Utilities Board ("IUB"):
The IUB's comments were primarily focused on the VoIP and access stimulation issues, and the IUB provided some great examples of recent Iowa decisions regarding both of these controversies. The IUB effectively argues that any VoIP service that is functionally equivalent to a telecommunications service should, 1: be subject to identical ICC rates, and 2: be classified as a telecommunications service. To illustrate this argument, the IUB described several IUB decisions where VoIP was classified as either a telecommunications or an information service--for example, non-nomadic cable telephony VoIP was classified as functionally equivalent to telecommunications service whereas nomadic VoIP was not functionally equivalent. According to the IUB, continued inconsistent VoIP classification by states and the FCC will cause significant regulatory uncertainty beyond the realm of ICC: "the consequences of functionally equivalent VoIP services not being classified as telecommunications services is the potential loss to public safety, service quality, and other public interest considerations..." (IUB, pg. 7). The IUB also discussed its 2010 decision adopting a High Volume Access Service (HVAS) trigger, where a 100% increase in intrastate exchange access billing within 6 months was established as a threshold for determining if a carrier is involved in access stimulation. The IUB points out that the FCC's proposed "Access Revenue Sharing" trigger is completely intolerant of access sharing and is thus more strict than Iowa's HVAS. I was pleased that the IUB concluded its comments by explaining how important ICC reform is to the state's many small rural providers, and that addressing the ICC issues will help ensure fair compensation--which is crucial for small companies who receive in excess of 50% of their revenue from ICC and USF.
Comments of The Blooston Rural Carriers (Prepared by Blooston, Mordkofsky, Dickens, Duffy & Prendergast, LLP):
The Blooston Rural Carriers argued in favor of imposing equal treatment of interconnected VoIP as telecommunications services and requirements to prohibit phantom traffic from the perspective of mandated competitive and technological neutrality. They argue that many VoIP providers have achieved their market share and low rates through payment avoidance and shady phantom traffic techniques. According to the Blooston Rural Carriers, competitive and technological neutrality are "the bedrock standards for regulating both the traditional voice sector and the emerging broadband sector of the telecommunications industry" (Blooston Rural Carriers, pg. 2). VoIP and phantom traffic carriers who do not follow these principles are cheating consumers and other carriers, which reduces incentives to invest and imposes an unfair burden on the consumers who do not use VoIP service. The Blooston Rural Carriers provide extensive proof that VoIP competes head-to-head with wireline and wireless carriers. Further, they argue that VoIP rates are not low because VoIP uses "better technology," but because many VoIP providers do not own or invest in networks and facilities--they free-ride on those who have made significant network and facility investments. Finally, the Blooston Rural Carriers argue that phantom traffic is technically equivalent to stealing cable TV by hooking up an unauthorized drop or using a stolen credit card, and the FCC needs to "sanction and fine service providers for engaging in unjust and unreasonable practices, such as intentionally and/or repeatedly omitting, stripping, or misidentifying call identifying information" (Blooston Rural Carriers, 9). A startling statistic is that as much as 20% of traffic terminating at RLECs contains missing or incorrect caller location and identification information. Wow.
Comments of Vonage Holdings Corp.
Vonage addresses the VoIP ICC issue and lightly touches on the phantom traffic issue. Vonage argues in favor of imposing a "bill-and-keep" regime for interconnected VoIP, as the FCC is planning to transition the industry to this regime anyway and it would be inefficient to require interconnected VoIP to make two transitions. I cannot personally weigh in on the bill-and-keep debate because I do not know enough about it, but the Blooston Rural Carriers argued that bill-and-keep is appropriate in situations where there is symmetrical traffic volumes and rates between carriers, which is not typically the case between VoIP and RLECs. Anyway, Vonage claims that imposing equivalent ICC requirements on VoIP providers is a "step backwards" to an increasingly irrelevant and obsolete per-minute framework. Vonage looks to the fact that interconnected VoIP is not geographically bounded like the PSTN, and in fact, VoIP and wireless have "made geography irrelevant in the wireline environment" (Vonage, pg. 5). Vonage listed many reasons why interconnected VoIP should be placed within a bill-and-keep regime, including: it is forward-looking, bill-and-keep is the FCC's ultimate goal, it will facilitate the transition to IP networks, it will create cost savings and lower rates for consumers, it will encourage providers to reduce costs, and finally, it will prevent ICC revenue generation schemes (like access stimulation). Vonage is basically arguing that bill-and-keep is the endgame solution to all of the industry's ICC problems, and allowing interconnected VoIP to transition to bill-and-keep immediately will not only prevent, but also prohibit many of the controversial problems that are currently plaguing the system.
Comments of Google, Inc:
Google credits VoIP as being central to the global power of the Internet, and notes that interconnected VoIP has increased 20% between 2009 and 2010, while traditional telephone service declined by 10%. Google argues against imposing traditional ICC mechanisms on interconnected VoIP providers, because traditional access charges will hinder IP network development and traditional ICC "conflicts with our clear national directive to keep Internet services free of heavy-handed government regulation" (Google, pg. 6). Like Vonage, Google provides a laundry list of reasons why bill-and-keep is the ideal default regime for interconnected VoIP: it is simple, it imposes a low administrative burden, it keeps the government out of issues between carriers, it is based on reciprocity, it is consistent with national broadband goals, and it encourages IP network/facility investment. I personally did not think that Google's arguments were especially convincing--they didn't offer much in terms of evidence to support their claims that bill-and-keep is the best solution and that interconnected VoIP providers should not be required to pay equal access charges as telecommunications providers.
Well, that's it for now! Do you think the FCC will be convinced that VoIP should be classified and treated like a traditional telecommunications provider within the ICC ecosystem, or will VoIP providers continue to evade regulatory parity? Clearly, there is very little consensus between the opposing sides of the industry on this issue--meaning it is definitely going to be a bitter battle until the FCC makes a decision, which will also clearly leave one side making a significant sacrifice.
Readers-- are there any other comments you would like to see summarized? If so, please leave a comment or send me an e-mail and I will see what I can do to add additional perspectives on the ICC abuse and arbitrage issue.
Cassandra Heyne
ruraltelecommentary@gmail.com
P.S. You can now "subscribe" to Rural TeleCommentary with RSS--the button is located to the right, below the "Telecom News and Resources" link list.
For your reference, this is in regards to:
In the Matter of:
Connect America Fund (WC DN 10-90)
A National Broadband Plan For Our Future (GN DN 09-51)
Establishing Just and Reasonable Rates for Local Exchange Carriers (WC DN 07-135)
High-Cost Universal Service Support (WC DN 05-337)
Developing a Unified Intercarrier Compensation Regime (CC DN 01-92)
Federal-State Joint Board on Universal Service (CC DN 96-45)
Lifeline and Link-up (WC DN 03-109)So now that we have gotten the formalities out of the way, let's have some fun with Intercarrier Compensation comments! I was not actually planning to spend much time this weekend reading comments, but when I heard about the FCC Workshop April 6 on ICC Reform, featuring a dozen or so "telecom regulatory luminaries," I knew should do some preparation before the FCC Workshop, which I plan to watch via FCC livestream from my house (assuming the video feed from the FCC isn't chugging along at 64kbps like it tends to do on these things). My intention is to read and summarize a small but elite group of comments to gain a better understanding about the rural telecom industry's concerns regarding ICC abuse and arbitrage, and then watch the FCC Workshop and write about that as well. Simple and straightforward, right? We shall see. ICC is not my strongest area of expertise, so just reading the comments has been a real learning--and eye-opening--experience for me. I'm well aware of the problems that VoIP carriers have been causing in the industry for some years now regarding their refusal to pay access charges, and I've been following the access stimulation/traffic pumping controversy for about 8 months. The more I read about these issues, the more I am convinced that ICC is indeed the most "broken" component of USF. I've criticized the FCC in the past for preaching about how "broken" the USF system is, but now I think I can safely admit the USF critics may have been correct, as long as they were referring specifically to ICC in their accusations of waste, fraud, abuse, arbitrage, and so on.
On to the comments... I've chosen to read and summarize comments from the Independent Telephone & Telecommunications Alliance (ITTA); Joint comments by NECA, NTCA, OPASTCO, WTA, Eastern Rural Telecom, The Rural Alliance and The Rural Broadband Alliance; the Iowa Utilities Board; Blooston Rural Carriers; Vonage and Google (to get the perspective from the "dark side"). The comments are centered around three key issues from Section XV of the USF Reform NPRM:
- The regulatory catagorization of VoIP traffic, specifically if VoIP providers should be subject to the same ICC rates as traditional telecommunications carriers. VoIP providers have been fighting tooth and nail to avoid paying access rates, despite the fact that there is clearly no difference from a consumer perspective between a VoIP call and a traditional PSTN voice call. Continuing to allow VoIP carriers to avoid access rates is not technologically neutral and encourages free riders and payment avoidance.
- Rules addressing phantom traffic, where providers omit certain call signaling information in order to make it impossible for the terminating carrier to identify, and properly charge, the originating carrier.
- Rules addressing access stimulation, where large volumes of traffic (usually in conjunction with free conference calling or "chat lines") are terminated in areas with access rates based on low demand (like rural areas). If access tariffs are not re-filed based on the increased call volume, ill-gotten revenue is gained by traffic pumping carriers.
Comments of the Independent Telephone & Telecommunications Alliance (ITTA):
ITTA urges the FCC to quickly adopt rules to prevent ICC abuse and arbitrage, adding that "abuse...is rampant throughout the country" (ITTA, pg. iii). Basically, if you use the PSTN, you need to pay. ITTA, an alliance of small and mid-sized telecommunications carriers, is very concerned about the increasing number of VoIP carriers who are withholding access payments, phantom traffic access avoidance schemes, and unreasonable rates resulting from access stimulation. Adopting rules to resolve these issues would restore certainty in the industry as well as create greater financial stability and predictability regarding ICC payments. These rules are necessary to implement before a broader ICC reform can be achieved, which is one of the FCC's goals for overall USF restructuring. ITTA argues that continued mischief in the ICC realm, such as access avoidance, is unacceptable and undermines the entire system. Although some parties argue that ICC itself is an outdated system, that does not justify making one's own rules (I can point to a lot of rules in this country that are "outdated" and "in need of reform," but that doesn't give any citizen the right to avoid the rules or devise their own personal variations just because they don't like the rules--if everyone did this our society would quickly crumble, which is clearly where the telecommunications ICC regime is headed without a quick resolution to ICC abuse coupled with effective enforcement mechanisms). ITTA points to the fact that VoIP providers are required to follow other rules such as E-911 and CALEA, where VoIP is clearly treated as equivalent to telecommunications service. It is simply bad policy to uphold a facade where VoIP traffic is treated differently than telecommunications traffic in some regulatory areas but the same in others, which will prevent investment and create unfair competitive advantages, as well as "condone the Wild West environment that characterizes intercarrier compensation today" (ITTA, p. 8). Regarding phantom traffic, ITTA supports the FCC's proposal to require calling party information in call signaling information no matter what technology the carrier uses (SS7, TDM, IP, etc). Furthermore, the FCC should be proactive about enforcing phantom traffic rules, which will ultimately help "eliminate cheaters and allow carriers to obtain fair compensation for use of their networks" (ITTA, p. v). Finally, ITTA insists that access stimulation is a violation of Section 201 by creating artificial demand and unreasonable rates. Overall, ITTA puts forth some very persuasive arguments about VoIP being functionally identical to PSTN traffic, and ITTA effectively illustrates the harm, risk and uncertainty that continued ICC abuse and arbitrage will cause to small and mid-sized carriers in rural areas if rules are not implemented as soon as possible.
Comments of NECA, NTCA, OPASTCO, WTA, ERTA, Rural Alliance, and Rural Broadband Alliance ("Rural Associations"):
The Rural Associations also agree that VoIP traffic should be subject to the same intercarrier compensation rates as PSTN traffic; specific and detailed call signaling requirements should be established to prevent phantom traffic; and reasonable rules should be implemented to prevent ill-gotten access stimulation revenue. Furthermore, the Rural Associations add that the FCC should consider developing rules to resolve refusal-to-pay situations to reduce the legal and financial burden on small carriers to recover revenue from non-paying carriers in court. The Rural Associations argue that ICC abuse and arbitrage cause ongoing and numerous billing disputes, complaints, litigation, an inefficient use of resources, and increased strain on the USF system. This amounts to significant regulatory uncertainty, and perpetuates the perception that the FCC has lost control of ICC altogether. The Rural Associations effectively disprove several common myths about VoIP: the myth that VoIP uses different technology for originating calls and therefore should be exempt from ICC; the myth that IP-enabled technologies deserve different regulatory treatment; and the myth that the use of "protocol conversion" in calls that originate on IP and terminate on the PSTN constitutes an "information service," which deserves ICC exemption. The Rural Associations argue that any differentiated treatment of VoIP in ICC constitutes discrimination, therefore VoIP should receive identical regulatory treatment as PSTN calls. Regarding phantom traffic, the Rural Associations believe that terminating carriers should be allowed to charge the highest rate to unidentified traffic as a penalty, which could become a very effective enforcement and prevention mechanism. I believe this would create a strong incentive for carriers to comply with call signaling information requirements. The threat of high costs and financial penalties is extremely powerful--I argued a few weeks ago that imposing data usage caps and overage fees would effectively deter some large-scale digital content piracy. Evading rules and fees is not nearly exciting or lucrative when the cost of the consequence increases beyond a certain threshold--the FCC needs to figure out what "penalty rate" would effectively prevent a considerable quantity of phantom traffic. Finally, the Rural Associations support reasonable rules to address access stimulation, but cautions the FCC to "distinguish between situations where traffic levels are artificially inflated and situations where traffic increases as a result of legitimate and much-needed economic activity in rural areas" (Rural Associations, pg. 32). There are many legitimate large-scale call centers located in rural areas, which should not be confused with intentional traffic pumping. Overall, I thought the Rural Association's arguments were very well developed and convincing, particularly the comments disproving that interconnected VoIP is fundamentally different than PSTN traffic, and the arguments about enforcing phantom traffic with financial penalties.
Comments of the Iowa Utilities Board ("IUB"):
The IUB's comments were primarily focused on the VoIP and access stimulation issues, and the IUB provided some great examples of recent Iowa decisions regarding both of these controversies. The IUB effectively argues that any VoIP service that is functionally equivalent to a telecommunications service should, 1: be subject to identical ICC rates, and 2: be classified as a telecommunications service. To illustrate this argument, the IUB described several IUB decisions where VoIP was classified as either a telecommunications or an information service--for example, non-nomadic cable telephony VoIP was classified as functionally equivalent to telecommunications service whereas nomadic VoIP was not functionally equivalent. According to the IUB, continued inconsistent VoIP classification by states and the FCC will cause significant regulatory uncertainty beyond the realm of ICC: "the consequences of functionally equivalent VoIP services not being classified as telecommunications services is the potential loss to public safety, service quality, and other public interest considerations..." (IUB, pg. 7). The IUB also discussed its 2010 decision adopting a High Volume Access Service (HVAS) trigger, where a 100% increase in intrastate exchange access billing within 6 months was established as a threshold for determining if a carrier is involved in access stimulation. The IUB points out that the FCC's proposed "Access Revenue Sharing" trigger is completely intolerant of access sharing and is thus more strict than Iowa's HVAS. I was pleased that the IUB concluded its comments by explaining how important ICC reform is to the state's many small rural providers, and that addressing the ICC issues will help ensure fair compensation--which is crucial for small companies who receive in excess of 50% of their revenue from ICC and USF.
Comments of The Blooston Rural Carriers (Prepared by Blooston, Mordkofsky, Dickens, Duffy & Prendergast, LLP):
The Blooston Rural Carriers argued in favor of imposing equal treatment of interconnected VoIP as telecommunications services and requirements to prohibit phantom traffic from the perspective of mandated competitive and technological neutrality. They argue that many VoIP providers have achieved their market share and low rates through payment avoidance and shady phantom traffic techniques. According to the Blooston Rural Carriers, competitive and technological neutrality are "the bedrock standards for regulating both the traditional voice sector and the emerging broadband sector of the telecommunications industry" (Blooston Rural Carriers, pg. 2). VoIP and phantom traffic carriers who do not follow these principles are cheating consumers and other carriers, which reduces incentives to invest and imposes an unfair burden on the consumers who do not use VoIP service. The Blooston Rural Carriers provide extensive proof that VoIP competes head-to-head with wireline and wireless carriers. Further, they argue that VoIP rates are not low because VoIP uses "better technology," but because many VoIP providers do not own or invest in networks and facilities--they free-ride on those who have made significant network and facility investments. Finally, the Blooston Rural Carriers argue that phantom traffic is technically equivalent to stealing cable TV by hooking up an unauthorized drop or using a stolen credit card, and the FCC needs to "sanction and fine service providers for engaging in unjust and unreasonable practices, such as intentionally and/or repeatedly omitting, stripping, or misidentifying call identifying information" (Blooston Rural Carriers, 9). A startling statistic is that as much as 20% of traffic terminating at RLECs contains missing or incorrect caller location and identification information. Wow.
Comments of Vonage Holdings Corp.
Vonage addresses the VoIP ICC issue and lightly touches on the phantom traffic issue. Vonage argues in favor of imposing a "bill-and-keep" regime for interconnected VoIP, as the FCC is planning to transition the industry to this regime anyway and it would be inefficient to require interconnected VoIP to make two transitions. I cannot personally weigh in on the bill-and-keep debate because I do not know enough about it, but the Blooston Rural Carriers argued that bill-and-keep is appropriate in situations where there is symmetrical traffic volumes and rates between carriers, which is not typically the case between VoIP and RLECs. Anyway, Vonage claims that imposing equivalent ICC requirements on VoIP providers is a "step backwards" to an increasingly irrelevant and obsolete per-minute framework. Vonage looks to the fact that interconnected VoIP is not geographically bounded like the PSTN, and in fact, VoIP and wireless have "made geography irrelevant in the wireline environment" (Vonage, pg. 5). Vonage listed many reasons why interconnected VoIP should be placed within a bill-and-keep regime, including: it is forward-looking, bill-and-keep is the FCC's ultimate goal, it will facilitate the transition to IP networks, it will create cost savings and lower rates for consumers, it will encourage providers to reduce costs, and finally, it will prevent ICC revenue generation schemes (like access stimulation). Vonage is basically arguing that bill-and-keep is the endgame solution to all of the industry's ICC problems, and allowing interconnected VoIP to transition to bill-and-keep immediately will not only prevent, but also prohibit many of the controversial problems that are currently plaguing the system.
Comments of Google, Inc:
Google credits VoIP as being central to the global power of the Internet, and notes that interconnected VoIP has increased 20% between 2009 and 2010, while traditional telephone service declined by 10%. Google argues against imposing traditional ICC mechanisms on interconnected VoIP providers, because traditional access charges will hinder IP network development and traditional ICC "conflicts with our clear national directive to keep Internet services free of heavy-handed government regulation" (Google, pg. 6). Like Vonage, Google provides a laundry list of reasons why bill-and-keep is the ideal default regime for interconnected VoIP: it is simple, it imposes a low administrative burden, it keeps the government out of issues between carriers, it is based on reciprocity, it is consistent with national broadband goals, and it encourages IP network/facility investment. I personally did not think that Google's arguments were especially convincing--they didn't offer much in terms of evidence to support their claims that bill-and-keep is the best solution and that interconnected VoIP providers should not be required to pay equal access charges as telecommunications providers.
Well, that's it for now! Do you think the FCC will be convinced that VoIP should be classified and treated like a traditional telecommunications provider within the ICC ecosystem, or will VoIP providers continue to evade regulatory parity? Clearly, there is very little consensus between the opposing sides of the industry on this issue--meaning it is definitely going to be a bitter battle until the FCC makes a decision, which will also clearly leave one side making a significant sacrifice.
Readers-- are there any other comments you would like to see summarized? If so, please leave a comment or send me an e-mail and I will see what I can do to add additional perspectives on the ICC abuse and arbitrage issue.
Cassandra Heyne
ruraltelecommentary@gmail.com
P.S. You can now "subscribe" to Rural TeleCommentary with RSS--the button is located to the right, below the "Telecom News and Resources" link list.
Sunday, April 3, 2011
Commissioner Copps Talks AT&T/T-Mobile Merger, Other Spectrum Issues with C-SPAN
This weekend, FCC Commissioner Copps (D) sat down with C-SPAN for a Q&A about the AT&T/T-Mobile merger and a variety of other timely spectrum and telecommunications issues. Amy Schatz, my favorite WSJ telecom writer, contributed questions in this episode of C-SPAN's The Communicators. I do not normally agree with Copps, but I am trying to pay less attention to a Commissioner's political affiliation and more attention to what they actually say, after becoming extremely frustrated with the political interference on the Net Neutrality decision. To refresh your memory, Net Neutrality has turned into an ongoing civil war between democrats and republicans, and I have observed that many people who have opinions on this issue do not actually know anything about it, they just side with their political party of choice. The actual Net Neutrality vote, which was 3-2 in favor of the rules (3 democrats vs. 2 republicans), was a complete fraud in my opinion. The two republican commissioners did not agree with the rules, but two of the democrats also did not actually agree with Genochowski's rules either, yet they still voted for them out of political alliance pressure. So, I firmly believe that the Net Neutrality vote should have been 1 in favor and 4 against, but unfortunately that is not how things turned out.
Anyway, Copps is speaking out against the AT&T/T-Mobile merger, and in the C-SPAN interview he argued that it will be a "steeper climb" for him to approve this merger than it was for him to approve the Comcast-NBCU merger. Copps argued that the merger will result in 2 companies controlling 80% of the spectrum, and that the merger itself may "suck the oxygen out" of other pending issues at the FCC. In a dose of humor, he referred to the FCC as the "Federal Merger Commission," and he seems especially concerned about what impact the merger will have on jobs and competition. Amy Schatz asked how the merger will impact the proposed incentive auctions (AKA reverse auctions)--I was especially impressed that she asked this question because I don't believe it has really been addressed, at least in any of the 500 articles I have read about the merger in the last two weeks. Copps indicated that the merged company may "change the game" of incentive auctions, and incentive auctions may be a less attractive solution with fewer players involved (Dear FCC: please consider this before approving incentive auctions!!). I am already convinced that incentive auctions will fail to increase spectrum ownership for small companies because small companies do not have equal economies of scale for equipment and infrastructure. When asked who will most likely participate in incentive auctions (meaning who will be willing to give up spectrum), Copps responded that it will most likely be "hard-pressed minority stations in big cities," and the hedge funds and banks that own large stations that only care about profit who will be willing to surrender spectrum for an attractive price. The combined forces of AT&T, T-Mobile and Verizon will certainly not make incentive auctions more attractive for small companies, that is for sure. Copps discussed other topics such as spectrum utilization by broadcasters vs. wireless carriers, creating a spectrum inventory, the FCC's approach to mergers over the last decade that he has been at the FCC, progress of the National Broadband Plan, and obstacles to USF reform. On that last point, Copps responded that the biggest obstacle to USF reform is that companies are accustomed to a system that is no longer viable in this era, and every player will need to sacrifice something, as well as change their mindsets, in order for a new USF to be successful (sounds ominous, I know).
Regarding the AT&T/T-Mobile merger, the only thing I want to add today that I did not discuss in my previous post on this topic is the importance of analyzing market concentration on a market-by-market basis, which Copps mentioned as well in the C-SPAN interview. AT&T has been extremely vocal about the "intense competition" in the wireless industry, and the company claims that the merger will be nothing but a blessing to the industry and consumers. AT&T claims that there are at least 4-5 wireless carriers in every market, but most of us from rural areas know that this is a lie. The FCC needs to consider how viable each competitor is to different sets of consumers in order to determine how many actual competitors exist in a given market. For example, someone in a rural area may be able to get "service" from Verizon, AT&T, and two regional carriers. However, it is unlikely that all of those carriers will provide high quality "coverage" in the places where a rural user needs to use his or her mobile voice and mobile Internet. So, lets say now there are only 2 viable competitive alternatives. From there, you have to consider other factors like monthly service plan choices, handset options, service contract obligations including early cancellation fees, what service the customer's family and friends use, and a variety of other factors. After considering and weighing all these factors, it is likely that a consumer only has one choice for a wireless provider. And that is not a competitive market! This isn't even a problem specific to rural areas. I may have a choice of 5 or more service providers in DC, but I have reasons for eliminating many of those options based on my budget, preferences, and needs--a major need being that I need to have service when I travel to rural Iowa, which automatically disqualifies several carriers from the running.
If the FCC is hoping to foster and achieve a wireless industry where all consumers have a choice between 4-5 viable alternatives, then this merger should not be approved. It may not necessarily decrease competition in some markets, but it certainly won't increase competition as AT&T is claiming. They cannot just say that there is sufficient competition across the board without taking into consideration actual customer behavior. I worked for a short time as a sales associate for T-Mobile, which was not entirely a good experience for me, but I learned a lot about customer preferences for wireless carriers. Customers chose T-Mobile for some very specific reasons--handset choice, low-cost service plans, and international roaming and international-capable handsets were the primary reasons. I am definitely interested to see how AT&T plans to maintain some of the qualities that made T-Mobile an attractive carrier for its loyal customers, or if AT&T's arrogance will prevail and they will just assume that all T-Mobile customers will happily accept the changes, just as they are arrogantly assuming that there is industry-wide intense competition.
The C-SPAN Q&A with Commissioner Copps is available to watch here.
Comments about ICC abuse and arbitrage were due on April 1, so this week I will be writing about the Intercarrier Compensation component of USF reform--look for my comment summaries in the next day or so, and a review of the FCC's ICC April 6 Workshop later this week.
Cassandra Heyne
ruraltelecommentary@gmail.com
Anyway, Copps is speaking out against the AT&T/T-Mobile merger, and in the C-SPAN interview he argued that it will be a "steeper climb" for him to approve this merger than it was for him to approve the Comcast-NBCU merger. Copps argued that the merger will result in 2 companies controlling 80% of the spectrum, and that the merger itself may "suck the oxygen out" of other pending issues at the FCC. In a dose of humor, he referred to the FCC as the "Federal Merger Commission," and he seems especially concerned about what impact the merger will have on jobs and competition. Amy Schatz asked how the merger will impact the proposed incentive auctions (AKA reverse auctions)--I was especially impressed that she asked this question because I don't believe it has really been addressed, at least in any of the 500 articles I have read about the merger in the last two weeks. Copps indicated that the merged company may "change the game" of incentive auctions, and incentive auctions may be a less attractive solution with fewer players involved (Dear FCC: please consider this before approving incentive auctions!!). I am already convinced that incentive auctions will fail to increase spectrum ownership for small companies because small companies do not have equal economies of scale for equipment and infrastructure. When asked who will most likely participate in incentive auctions (meaning who will be willing to give up spectrum), Copps responded that it will most likely be "hard-pressed minority stations in big cities," and the hedge funds and banks that own large stations that only care about profit who will be willing to surrender spectrum for an attractive price. The combined forces of AT&T, T-Mobile and Verizon will certainly not make incentive auctions more attractive for small companies, that is for sure. Copps discussed other topics such as spectrum utilization by broadcasters vs. wireless carriers, creating a spectrum inventory, the FCC's approach to mergers over the last decade that he has been at the FCC, progress of the National Broadband Plan, and obstacles to USF reform. On that last point, Copps responded that the biggest obstacle to USF reform is that companies are accustomed to a system that is no longer viable in this era, and every player will need to sacrifice something, as well as change their mindsets, in order for a new USF to be successful (sounds ominous, I know).
Regarding the AT&T/T-Mobile merger, the only thing I want to add today that I did not discuss in my previous post on this topic is the importance of analyzing market concentration on a market-by-market basis, which Copps mentioned as well in the C-SPAN interview. AT&T has been extremely vocal about the "intense competition" in the wireless industry, and the company claims that the merger will be nothing but a blessing to the industry and consumers. AT&T claims that there are at least 4-5 wireless carriers in every market, but most of us from rural areas know that this is a lie. The FCC needs to consider how viable each competitor is to different sets of consumers in order to determine how many actual competitors exist in a given market. For example, someone in a rural area may be able to get "service" from Verizon, AT&T, and two regional carriers. However, it is unlikely that all of those carriers will provide high quality "coverage" in the places where a rural user needs to use his or her mobile voice and mobile Internet. So, lets say now there are only 2 viable competitive alternatives. From there, you have to consider other factors like monthly service plan choices, handset options, service contract obligations including early cancellation fees, what service the customer's family and friends use, and a variety of other factors. After considering and weighing all these factors, it is likely that a consumer only has one choice for a wireless provider. And that is not a competitive market! This isn't even a problem specific to rural areas. I may have a choice of 5 or more service providers in DC, but I have reasons for eliminating many of those options based on my budget, preferences, and needs--a major need being that I need to have service when I travel to rural Iowa, which automatically disqualifies several carriers from the running.
If the FCC is hoping to foster and achieve a wireless industry where all consumers have a choice between 4-5 viable alternatives, then this merger should not be approved. It may not necessarily decrease competition in some markets, but it certainly won't increase competition as AT&T is claiming. They cannot just say that there is sufficient competition across the board without taking into consideration actual customer behavior. I worked for a short time as a sales associate for T-Mobile, which was not entirely a good experience for me, but I learned a lot about customer preferences for wireless carriers. Customers chose T-Mobile for some very specific reasons--handset choice, low-cost service plans, and international roaming and international-capable handsets were the primary reasons. I am definitely interested to see how AT&T plans to maintain some of the qualities that made T-Mobile an attractive carrier for its loyal customers, or if AT&T's arrogance will prevail and they will just assume that all T-Mobile customers will happily accept the changes, just as they are arrogantly assuming that there is industry-wide intense competition.
The C-SPAN Q&A with Commissioner Copps is available to watch here.
Comments about ICC abuse and arbitrage were due on April 1, so this week I will be writing about the Intercarrier Compensation component of USF reform--look for my comment summaries in the next day or so, and a review of the FCC's ICC April 6 Workshop later this week.
Cassandra Heyne
ruraltelecommentary@gmail.com
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