No dialtone: the end of the public switched telephone network.

• Author: Werbach, Kevin
• Position: I. Introduction through II. The Transition, p. 203-234

TABLE OF CONTENTS I. INTRODUCTION II. THE TRANSITION A. Goodbye to All That 1. The Public Switched Telephone Network 2. The Incredible Shrinking Network 3. The Carriers Make Their Move 4. Changing Facts on the Ground 5. FCC Response B. What We Talk About When We Talk About the PSTN 1. Unpacking the Concept 2. The Legacy PSTN a. Technical Architecture b. Regulatory Arrangement c. Market Structure 3. Enduring Objectives a. Universal Connectivity b. Strategic Infrastructure c. Social Contract C. The Regulatory Dead-End 1. All or Nothing 2. The Perseverance of Unregulation III. RECONCEIVING THE INTERNETWORK A. What Falls Away B. Interconnection 1. Importance of Interconnection 2. Internet Interconnection Disputes 3. VoIP Interconnection C. Coordination 1. Role of Coordination 2. Numbering 3. Reliability IV. TRANSITION MECHANISMS A. Section 214 1. The Approval Requirement 2. Cutting the Regulatory Gordian Knot B. Date Certain V. CONCLUSION I. INTRODUCTION

All good things must come to an end. The Public Switched Telephone Network ("PSTN") is the foundation for the modem global communications system and the myriad benefits it delivers. Today, the era of the PSTN is swiftly coming to a close. The PSTN's technical, economic, and legal pillars have been undermined in the United States by three developments: the rise of the Internet; customers and providers abandoning wireline voice telephony; and the collapse of the regulatory theory for data services. This Article provides a framework for moving beyond the PSTN, by distinguishing the aspects of the existing system that should be retained, reconstituted, and abandoned.

The transition from the PSTN to a broadband network of networks is the most important communications policy event in at least half a century. (1) It calls into question the viability of the Federal Communications Commission ("FCC"), the Communications Act, and the telecommunications industry as we know it. Yet the significance of the transition is not widely recognized. Attention has focused on specific manifestations and consequences, such as the rise of "wireless-only" households and problems with rural call completion.

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. Without this planning, structural transitions are dangerous opportunities for chaos that can gravely harm the public interest.

There are two mainstream views about how to handle the PSTN transition. One is that it represents the completion of a deregulatory arc begun at the AT&T divestiture and accelerated by the Telecommunications Act of 1996. The other is that longstanding regulatory obligations need only be extended to the new world. Both are wrong because they treat the PSTN as a unitary thing. What we call the PSTN is actually six different, but interrelated, concepts:

1) a technical architecture;

2) a regulatory arrangement;

3) a business and market structure;

Kevin Werbach, Associate Professor of Legal Studies and Business Ethics, The Wharton School, University of Pennsylvania. Contact: werbach@wharton.upenn.edu.

4) universal connectivity;

5) strategic national infrastructure; and

6) a social contract.

The elements earlier on the list are rooted in the particular historical, legal, and technical circumstances that gave birth to the PSTN. They are anachronistic in the current environment. The later elements are public policy obligations that should be satisfied regardless of the historical circumstances. The question for regulators is how to do so in the most efficient and effective manner, given the changed circumstances.

The end of the PSTN involves two primary developments. First, customers are switching from the incumbent wireline telephone companies to alternatives using different networks or technologies, primarily wireless phones and voice over Internet protocol ("VoIP"). Second, those telephone companies themselves are migrating away from the technical underpinnings of the PSTN, seeking to move their own customers to wireless and VoIP-based alternatives.

The initial stage of the PSTN transition is occurring with surprising speed. The PSTN has been around for more than a century, and reached effective ubiquity in U.S. households in the middle of the last century. (2) It is deeply woven into the fabric of daily life and business. It seems unthinkable that it could disappear in a generation, let alone a decade. Yet for all intents and purposes, the era of the PSTN as the country's dominant communications network is already over. The FCC's Technology Advisory Committee has predicted that by 2018, the PSTN market will reach only six percent of the U.S. population. (3)

The PSTN is rapidly becoming an afterthought. Its market share will continue to shrink even if the incumbent network operators do nothing. And they are doing significantly more than that. They are putting into motion plans to transition their PSTN customers to VoIP or wireless connections. A small number of Verizon customers have already been transitioned to a wireless service that doesn't provide the full functionality of the PSTN as their only option for phone service. (4) And AT&T has petitioned the FCC for authorization to switch entire communities over to IP-based technology on an experimental basis. (5) The endgame for both, and for virtually all PSTN providers, is to move to an all Internet Protocol ("IP") network with no switched wireline voice connections. (6)

The death of the PSTN is a good thing. The reason all new entrants are using IP-based technologies, and all existing providers want to, is that these technologies offer enhanced functionality and cost savings. Both customers and industry will benefit from the switchover. Yet there are two significant and related problems with the transition. The PSTN delivers highly important public interest benefits, not all of which will necessarily be preserved when moving away from traditional telephone service. These benefits range from consumer protections to public safety considerations. Second, the U.S. regulatory regime for telecommunications is tightly connected to the PSTN. Partly as a result, the business arrangements of the telecommunications sector assume the PSTN as a backstop. If all regulatory obligations disappear with the transition, the consequences could be dire.

The transition process is complicated by the past decade of telecommunications policy-making, which has left the legal regime for IP-based services a confusing mess. Fortunately, even without congressional action, the FCC retains sufficient legal authority to address the critical issues. The best way to do so is through the transition process itself, because telecommunications carriers are required to apply for FCC approval whenever they terminate service. (7) The statutory process under section 214 of the Communications Act offers a unique opportunity to facilitate the PSTN transition without being caught up in the detritus of other policy-making. (8)

The remainder of this paper is organized as follows: Part II describes the PSTN and the IP transition now underway; Part III offers a framework that eliminates legacy requirements while ensuring public interest protections going forward; and Part IV discusses the specifics of the transition process.

2. THE TRANSITION

1. Goodbye to All That

   1. The Public Switched Telephone Network

      The telephone is among the most profound inventions of the last 150 years. (9) It is how we stay in touch with friends and family, perform business transactions, and obtain vital information. Without the telephone, modern cities, transportation networks, corporations, law enforcement, and many other attributes of the world we live in would not be possible. The ability to, in the words of a famous AT&T slogan, "reach out and touch someone," in real time, anywhere, has brought massive efficiencies to business and altered the fabric of social interaction. (10) Many decades of technological evolution have led from rotary phones making calls connected by human operators to today's feature-laden digital devices, but the telephone as a universal communications tool has been a constant.

      We take all this for granted. We assume we can call a doctor or summon public safety personnel in an emergency, obtain customer service from a business, or put children in touch with grandparents across the country. Like fish swimming in water, we have a hard time imagining a world in which reliable, universal telephone service could not be counted on. Yet today, such disruption is a real possibility.

      The telephones in our homes, businesses, pockets, and purses are not islands. They are the visible endpoints of a vast and unbelievably complex edifice built at massive expense over the course of a century. Phones "just work" every day for hundreds of millions of Americans--and billions of people around the world--through the cooperative efforts of many companies, often direct competitors, of varying sizes and configurations. The hidden infrastructure supporting telephones gave us many other things that piggybacked on the network, not least of which is the Internet. The system that enables all this and more is the PSTN.

      Colloquially, the PSTN refers to the wired telephone network that reaches into virtually every American home. However, such a definition is misleading. The PSTN is not a particular set of physical components. The same copper wires that deliver telephone service to the home can also support non-PSTN services such as broadband Internet access and video programming. (11) At the same time, traditional telephone service can be delivered to the home over non-PSTN connections. A Comcast Digital Voice customer uses an...