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

• Author: Werbach, Kevin
• Position: III. Reconceiving the Internetwork through V. Conclusion, with footnotes, p. 234-262

3. RECONCEIVING THE INTERNETWORK

   1. What Falls Away

      The switched telephone network and its accompanying regulatory and business arrangements deserve to die. Their era has passed. However, that does not mean that the idea of a public network has no enduring relevance. (177) To the contrary, some aspects of the PSTN are not tied to the particular technical, legal, or economic conditions that prevailed in 1934 or 1996. There are good economic and public interest reasons to continue treating communications network operators differently than ordinary businesses. The task is therefore to define a regime for today's world that preserves the enduring aspects of the PSTN and jettisons those that are no longer applicable.

      In effect, the Internet will become the new PSTN. In the process, however, the Internet has already changed and will continue to do so. As it becomes the default communications infrastructure, the Internet can no longer depend, as it has to date, on access to physical infrastructure regulated as telecommunications. Moreover, public policy considerations such as universal access, interoperability, reliability, privacy, access for persons with disabilities, emergency services, and law enforcement access become questions for Internet-based services. (178) As noted above, the last two decades of communications policy have created largely incompatible regulatory domains for the Internet and the PSTN at the same time as market forces joined them together.

      The FCC has taken some steps in this direction in its treatment of VoIP. In a series of proceedings, it extended telecommunications regulation to "interconnected" VoIP providers; that is, those offering the familiar experience of dialing a telephone number on an ordinary phone. 179 Interconnected VoIP providers must now contribute to universal service funding, (180) offer access to E911 emergency service, (181) provide access to law enforcement subject to legitimate wiretaps, (182) accommodate persons with disabilities, (183) adhere to privacy rules for the customer information they use to complete calls, (184) support the ability of existing subscribers to keep their existing telephone numbers when switching services, (185) and report service outages to the Commission. (186)

      One problem with the FCC's approach is that it imposed these obligations pursuant to its ancillary authority under Title I of the Communications Act. (187) It thus did not have to decide whether any component of the VoIP offerings was a telecommunications service subject to Title II. In most cases, the FCC justified its actions on the grounds that even if VoIP was an information service, interconnected VoIP calls were likely to pass over the regulated telecommunications networks of the PSTN. (188) If and when those networks themselves move to VoIP, the legal rationale evaporates.

      A second problem with the FCC's actions is they are ad hoc. The FCC has not adopted principles for what forms of regulation should remain in the shift from TDM to IP and what may be abandoned. The six dimensions of the PSTN offer a framework for making such decisions. (189) Rules that are rooted in technology, regulatory arrangements, or market structure are likely to be anachronisms that can be abandoned. Those based around universal connectivity, strategic infrastructure, and a social contract retain their significance as the network evolves. (190) The regulatory framework for the PSTN transition should be based on evolving regulatory policies to support these goals in a new environment.

      Pulling apart and constituting the PSTN in this way clarifies that two kinds of regulatory initiatives should endure: those involving interconnection and coordination. The first involves rules to ensure the network of networks retains its universal character. The second reflects the persistence of the PSTN as critical and essential infrastructure. Together, they form the nucleus of a new social contract for the emerging IP-based communications environment.

   2. Interconnection

      1. Importance of Interconnection

         Smooth interconnection between communications networks is necessary to support many essential functions, but often goes unnoticed until something goes wrong. State troopers in western Montana found this out in summer 2013. (191) The mobile phones they carried with them, and the laptop computers in their cruisers, had service provided by Verizon Wireless. (192) However, because Verizon's network coverage wasn't ubiquitous in the rural area, the troopers--and all other mobile phone subscribers in the area--were actually "roaming" on a network owned by AT&T. (193) When the roaming agreement between the two companies expired, things changed. Suddenly, areas that previously had good service provided no reception at all. (194) The state troopers often had to drive thirty miles or more to get a usable signal. (195) Public safety services were adversely affected for residents of that part of Montana. (196)

         This example illustrates the power of interconnection. Few communications networks, services, or applications can survive without linkages to other networks. The only player to be successful without interconnection is an operator sufficiently ubiquitous to reach a substantial portion of the market on its own--as in the case of pre-divestiture AT&T. For anyone else seeking to deliver a network-based service, reaching customers requires some path through networks controlled by others.

         In telecommunications, interconnection is, in the words of Eli Noam, "the paramount tool of regulation." (197) This is true at every stage of competition. In an era of regulated monopoly, the government mandates interconnection to ensure ubiquitous service and regulates interconnection charges to allocate costs across the network. (198) In a period of market opening, such as prevailed in the U.S. in the 1980s and 1990s, interconnection rules are the means of breaking down monopolies. (199) And as markets become competitive, interconnection prevents holdouts and fosters efficient network integration. (200)

         As Howard Shelanski observes, the rationale for interconnection obligations differs from that for most other telecommunications regulation." (201) It is not necessarily tied to the monopoly history of the U.S. telecommunications market because interconnection remains important even when there are multiple competitors with significant market shares. (202) As Noam explains, interconnection is a kind of anti-fragmentation policy that reduces transaction costs." (203) Having more competing networks doesn't eliminate the need for interconnection; in fact, it amplifies it. (204) An uneven interconnection environment produces situations like the one in Montana, which belie the universality of the PSTN.

         In the traditional PSTN environment, interconnection obligations are clear. Section 201(a) of the Communications Act obligates all common carriers "to establish physical connections with other carriers." (205) Section 251, added by the Telecommunications Act of 1996, further states, "Each telecommunications carrier has the duty ... to interconnect directly or indirectly with the facilities and equipment of other telecommunications carriers." (206) A network operator simply cannot refuse to offer interconnection to another network, although there is room for negotiation on some economic terms and the physical points of connection. (207) Nor can carriers refuse to carry certain traffic across their interconnection links, because they are bound by the non-discrimination provisions of section 202. (208)

         When carriers have failed to honor their connectivity obligations, the FCC has been willing to step in. When conference calling services began to offer free services by exploiting high terminating access charges in rural areas, some telephone companies responded by blocking calls to those numbers." (209) The FCC acknowledged the services were problematic but ordered the carriers not to engage in "self help." (210) More recently, the FCC adopted rules to address problems of calls not being completed to some rural subscribers. (211) The problem appears to be the inadvertent result of a variety of technical decisions, but the FCC recognized that non-universal connectivity undermines the essential promise of the PSTN. (212)

         In some markets, pressure to interconnect is sufficiently great that competitors are able to negotiate reasonable commercial arrangements on a private basis. (213) The fact that private interconnection regimes sometimes develop, however, does not mean that they always do or that they necessarily produce a well-functioning market. (214) An interconnection dispute that cuts off service for some customers to other subscribers is a major public policy harm. (215) This is true regardless of the underlying technology involved.

         The Montana situation illustrates the challenge in a post-PSTN world. On the wireline PSTN, it would be impermissible for AT&T to cut off Verizon customers. Because this was a roaming arrangement between two mobile phone networks, however, it was essentially an unregulated commercial arrangement. As mobile and VoIP connections become the new PSTN, this dichotomy becomes increasingly untenable.

      2. Internet Interconnection Disputes

         The Internet provides a glimpse of the post-PSTN future of interconnection. Interconnection is as important to the Internet as to the PSTN, but it has traditionally operated differently, both in technical and regulatory terms. (216) In recent years, however, the Internet's model of purely voluntary, private interconnection has begun to fray, as the Internet and legacy communications networks converge.

         Internet service providers can choose whether to interconnect with one another. (217) Any provider offering transmission using the Internet protocol is technically free to interconnect and join the Internet, but companies must agree on the terms and location of interconnection. (218) Unlike the...