No dialtone: second thoughts on the PSTN's demise.

• Author: Faulhaber, Gerald R.
• Position: Public Switched Telephone Network

Table of Contents I. Introduction. II. The PSTN Transition Has Already Started. III. Preserving the PSTN's Features Without Regulation. IV. Conclusion I. INTRODUCTION

With only mild hyperbole, Werbach states that "[t]he transition from the PSTN to a broadband network of networks is the most important communications policy event in at least half a century." (1) For years, Internet aficionados have proclaimed the imminent death of the Public Switched Telephone Network ("PSTN"), asserting that telephony is just another app. Finally, that day has arrived. People are leaving the PSTN in droves. As Werbach notes, the fraction of U.S. households with a wireline telephone has fallen from 93% in 2003 to 25% in 2013. (2)

In fact, telephone companies are not standing idly by while their PSTN base erodes. The fixed cost of the PSTN is huge, as Werbach points out; (3) as the revenue base erodes, maintaining the PSTN becomes untenable. Telephone companies are actively seeking to sunset the PSTN in two ways: first, by petitioning the FCC to permit them to conduct local trials to transition customers from PSTN to wireless or VoIP; and, second, by announcing plans to transition most customers by 2015. (4)

2. The PSTN Transition Has Already Started

   Werbach is clear that this transition is a good thing. He states:

   The time has come to address the situation squarely. The lesson from prior structural transitions in communications such as digital television, the AT&T divestiture, and the opening of local telephone competition is that, with good planning and the right policy decisions, such shifts can proceed smoothly and open new vistas for competition and innovation. (5) This is the first indication that Werbach is far off-base. If these are examples of good planning and the right policy decisions, we are all in big trouble.

   First, the transition to digital television broadcasting was mandated by the Telecommunications Act of 1996, to be achieved by 2006. (6) Nevertheless, the transition was pushed back several times, and finally implemented in June 2009. While the actual transition went relatively smoothly, thirteen years seems a rather long time for a transition substantially less stressful than the demise of the PSTN.

   Second, although the AT&T divestiture broke up the country's largest monopoly three decades ago, after many years of industry evolution and a great deal of cost, we now have two dominant suppliers of telephony that use the PSTN. (7) It is hard to see how this is a major advance, at least as regards telephony.

   Third, the introduction of local telephone competition via the Telecommunications Act of 1996 involved over five years of FCC rulings to make competitive local exchange carriers ("CLECs") viable. In this case, competition involved the mandated wholesale of incumbents' local PSTN distribution facilities to new entrants. (8) Today, virtually all PSTN competition is either wireless or VoIP; CLECs have all but disappeared. (9) Again, it's difficult to understand why this was at all useful.

   "[G]ood planning and the right policy decisions?" Let's hope we can avoid similar disasters to the ones these exemplars have visited upon us for the PSTN transition.

   While Werbach supports the PSTN transition, he is critical of some of what the telephone companies have done so far. He notes that Verizon has offered Voice Link service, a wireless platform, as a substitute for wireline where problems have occurred. (10) He goes on to state that Voice Link is by no means a perfect substitute for PSTN local service. (11) But most of the features he claims Voice Link lacks are either available or insignificant. For example, he claims that one cannot use Voice Link to transmit a fax, as one can do using a wireline phone. (12) But there are numerous wireless fax apps available on smartphone app stores. (13) He also notes that a cell phone cannot be used as a dial-up modem; (14) this is true, but why would anyone want this service? With a smartphone tethered to a computer, a user can access the Internet directly (and at higher speeds than a dial-up modem). (15) Again, he mentions that a wireless phone (and perhaps VoIP) can't be used with current burglar alarms; (16) however, much better home security systems are currently available that use the Internet, and they are often cheaper than old-fashioned burglar alarms. (17) Werbach's claims thus seem somewhat pedestrian, akin to complaining that modem interstate highways are not very suitable for horses and buggies.

   Perhaps more on point is that Voice Link guarantees a 36 hour battery; is this enough? Are extra batteries available for those who need them? How about batteries to run cellular towers in case of a general power outage? We know that in major disasters, such as Hurricane Katrina, all communications may go down: PSTN, wireless, and cable (during Hurricane Katrina, only satellite continued to function). (18) What is an acceptable battery life, and who should decide what's acceptable? Werbach does not say.

   Werbach characterizes AT&T's petition for limited trials to replace the PSTN with services subject to fewer regulations as "a dagger to the heart of the telecommunications regulatory structure of the Communications Act," (19) as it appears to presage the nationwide deployment of PSTN's replacement and, with it, the demise of many longstanding regulations. But isn't this a good thing? We regulated the PSTN because it is (or was) a natural monopoly; if we now use competing Internet and wireless services as alternatives, then the monopoly is no more. So why do we need to keep regulation? Werbach believes the transition from the PSTN natural monopoly is a good thing, but he seems to think residual regulation is a good thing too--even if the rationale for it has disappeared.

3. Preserving the PSTN's Features Without Regulation

   Early on, Werbach lays out how the PSTN should be defined in six concepts:

   (1) Technical architecture;

   (2) Regulatory arrangement;

   (3) Market structure;

   (4) Universal connectivity;

   (5) Strategic infrastructure; and

   (6) Social contract. (20)

   He sums up his article in this superb statement: "In essence, the first three conceptions of the PSTN are essentially descriptive, while the other three are normative. What the PSTN is, should be allowed and even encouraged to change; what the PSTN does, should be protected." (21) In other words, the first three conceptions will disappear with the transition, but the second three must be maintained. I fully agree with this statement, and applaud Werbach's insight and...