Appendix A. An Overview of Communications Networks

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APPENDIX A

AN OVERVIEW OF

COMMUNICATIONS NETWORKS

This Appendix briefly describes various types of communications

networks that currently operate and an overview of those networks. It

also includes discussions of major regulatory initiatives affecting these

sectors. Government regulation of the telecommunications industry is as

old as the industry itself, and as described elsewhere in this Handbook,

one of the perennial issues in the telecommunications industry is how

government regulation interacts with and affects the application of the

antitrust laws.1

A. The Public Switched Telephone Network

1. Architecture

The public switched telephone network (PSTN) is one of the oldest

and most pervasive of modern communications networks. As of March

2003, almost 96 percent of U.S. households had a telephone in their

homes,2 and the companies that provide telephone services include some

of the largest companies in the United States.3 This section provides an

overview of the key attributes of the PSTN.

The core purpose of the PSTN is to transmit information between

two or more telephones, computers, or other types of subscriber

equipment (known as customer premises equipment or CPE).4 The

PSTN does this by establishing a temporarily dedicated route between

1. See supra at Chapters VII, VIII.

2. See Alexander Belinfante, FCC Indus. Analysis and Technology Div.,

FCC Wireline Competition Bureau, Telephone Subscribership in the

United States, 8 at Table 2 (June 2004), available at

www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/su

bs0704.pdf.

3. See Fortune 500 list for 2004, which includes 23 telecommunications

firms, including Verizon, SBC, AT&T, Sprint, and BellSouth, available

at www.fortune.com.

4. See, e.g., 47 U.S.C. § 153(14); William H. Sharkey, Representation of

Technology and Production, in 1 HANDBOOK OF TELECOMMUNICATIONS

ECONOMICS 182 (Martin Cave et al. eds, 2002); Verizon Communications,

Inc. v. FCC, 535 U.S. 467, 488 (2002).

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the CPE of the calling party and the called party, through various

switches and facilities of the telecommunications carriers that handle the

traffic. When CPE is operated, such as when the handset of a telephone

is picked up, a circuit is established between the CPE and the local

exchange carrier (LEC) switch, which is located in the telephone

company’s central office.5 The line that connects the customer premises

to the switch is called the local loop.6 When the circuit is established, the

switch produces a dial tone. The caller can then dial the telephone

number of the party to be called. If a local number is dialed, the switch

determines the loop that is assigned to the called number, and establishes

a circuit along that subscriber line loop, causing the CPE at the end of the

loop to ring. When the call is answered, the circuits along the two

subscriber loops are locked and dedicated to messages, voice, or data

passed between the two CPE.7 When a large local calling area is

involved many switches, connected directly to each other or via a

“tandem switch” and high capacity trunks, often are employed as a single

exchange to connect and complete the call.8

When a long distance or international call is made over the PSTN,

the initial signal still travels from the calling party’s CPE to the local

switch located in a LEC central office. Here, however, the switch

recognizes the dialed number as a long distance or international call and

routes the signal to the calling party’s presubscribed or selected

interexchange carrier (IXC), whose long-distance network is

interconnected with the local telephone network.9 Using the dialed

5. See HARRY NEWTON, NEWTON’S TELECOM DICTIONARY 792 (20th ed.

2004) (defining a “switch” as a “mechanical or electrical device which

opens or closes circuits, completes or breaks an electronic path, or selects

paths or circuits”).

6. Id. at 488 (defining the “local loop” as “[t]he physical connection from

the subscriber’s premises to the carriers POP (Point of Presence)); see

also Sharkey, supra note 4, at 182-83; Verizon Communications, 535 U.S.

at 467.

7. Call set up and completion also require the interaction of complex

signaling systems and databases. See Implementation of the Local

Competition Processes in the Telecommunications Act of 1996, First

Report and Order, 11 F.C.C.R. 15499, 15723-25, ¶¶ 455-59 (1996).

8. NEWTON, supra note 5, at 804 (defining a “tandem switch” as a switch

that “connects one trunk to another . . . [or] an intermediate switch or

connection between an originating telephone call location and the final

destination of the call”).

9. See id. at 492 (recognizing that a long distance call is “[a]ny telephone

call to a location outside the local service area”).