Regulatory Silos ‘Nonsensical’ in New IP World, AT&T Says, as Stakeholders Contemplate the Transition

As the telecom industry transitions to Internet Protocol, traditional regulatory approaches will have to be totally rexamined, and government should enact policies that encourage investment in new broadband infrastructure, speakers said Friday at a Wiley Rein workshop on the “IP Transition as Grand Challenge.” Industry stakeholders discussed strategies for the transition away from the TDM, as some wondered what to do about what they called “corrupt” state public utility commissions that want to apply legacy regulations to a world of new technologies.

Regulations will need to change to reflect the new reality, where voice is just one of many applications riding on the Internet infrastructure, said Jim Cicconi, AT&T senior executive vice president. The traditional regulatory approach of regulatory silos “has been totally overtaken and made virtually nonsensical by this new IP world,” he said.

Cicconi called for modernization of the regulatory structure, and clear direction from Congress so operators can resolve uncertainties and the industry can evolve to its full potential. Embracing an all-IP world will make some state and federal regulators “very uncomfortable,” he said, because “their regulatory hold is on Title II services.” But we have to “fundamentally change the way we think about regulation in this country,” he said. “It makes no sense to treat the Internet and IP services as if they're one gigantic telephone.” Cicconi criticized the FCC’s actions to require data roaming, which he said is essentially Internet access over a mobile device. The FCC’s theories “look and feel very much like Title II theories,” even though there’s a clear prohibition in Title III against applying any common carriage regulation to mobile broadband, he said.

Cicconi urged lawmakers to realize their actions will affect Internet policy worldwide. Countries who seek control over the Internet, like China and Russia, are pointing to the U.S. “as justifications for their own initiatives,” he said. Open FCC proceedings like whether to regulate IP-to-IP interconnection under Title II “goes to the heart” of how the Internet functions. The U.S. can’t claim that other countries can’t regulate the Internet, while claiming it’s “different” when we do it, he said: “We can’t advance a principle globally if we're not prepared to follow that same principle here at home."

Cicconi also took aim at some state public utility commissions’ rules. In California, for instance, the state PUC is trying to apply legacy telephone rules to IP services, he said. Maintenance requirements for service outages and dispatch of technicians, plus long reports involving arcane areas of data on regular increments, were all put in place to regulate a monopoly Bell system. Now a California PUC commissioner wants to regulate Skype just like the regular phone service, he said. “It’s a very slippery slope when you say, ‘OK we're going to regulate this kind of bit, but not that kind of bit.'"

The IP transition is not “the opportunity to fix the problem that’s been bugging you for the last 10 or 15 years,” said Harold Feld, legal director of Public Knowledge. He pointed to a “stampede to shut the states out of this.” Many stakeholders accuse the state public utility commissions of being corrupt, “and that’s true -- or rather, there’s enough truth to some of that, that you can point to your favorite horror story” -- but cutting states out of the reform process would be problematic down the line because they perform a valuable function, he said.

The IP transition is “a grand opportunity to really screw things up,” Feld said. It could represent a “fantastic upgrade” for all Americans and be done in a beneficial way for “the vast majority of people involved.” But if it’s handled poorly, there’s a great opportunity to drive up costs and create incompatibilities, and “get so many people so upset that they start screaming for really bad policy."

Before reconciling the telecom and Internet industries, it’s important to realize that the two worlds come from very different philosophies, Feld said: Telecom has traditionally been a “five nines reliability” service -- stable, ubiquitous and affordable. In contrast, IP “has its roots in the notion of a best effort service,” he said. A new system will need to be as reliable as POTS, while still maintaining all the value that came out of a “best efforts” system, such as freedom and the ability to experiment, Feld said.

"These two world views can coexist,” said Daniel Berninger, founder of the Voice Communication Exchange Committee, a nonprofit advisory committee dedicated to a smooth transition to all-IP networks by 2018. “We just need to figure out how to get there.”