Cost-based Access to Bottleneck Facilities Still Needed forVoIP

Like Neil Armstrong, the first astronaut to walk on the moon, entrepreneurial competitive telecommunications providers are pioneers, taking the risky plunges that result in giant steps for the industry as a whole.

In the 1980s, CompTel/ASCENT members, such as MCI and Sprint Corp., were the first to take on the longdistance monopoly. After divestiture forced open the market, these companies deployed high-quality networks over which users could ‘hear a pin drop’ and led the charge in creating a robust marketplace of multiple facilities-based providers that resulted in significantly lower long-distance phone bills.

In the 1990s, our members, such as ITC^DeltaCom Inc., KMC Telecom and LCI Communications, led the charge in the competitive local exchange business as the passage of the 1996 Telecommunications Act opened local markets to carriers other than the Bell companies.

That competition spawned countless new technologies and created efficiencies that have given consumers and small businesses options and advanced services they may never have had the opportunity to experience without such radical changes.

Now in the early 21st century, CompTel/ASCENT members, such as Covad Communications Group, Vonage Holdings Co., Callipso Corp. and Point One Inc., again are leading the pack. These companies are among the first to deploy cutting-edge VoIP applications, pressuring the typically sloth-like Bell monopolies to quickly follow suit or be left behind.

But, like Armstrong’s moon walk, there are inherent risks to being the first to step into uncharted territory.

Though times have changed over the past three decades, our challenge remains the same: breaking the monopoly stranglehold.

While a multitude of long-distance carriers providing low-cost offerings is proof positive of the success in opening that market segment, the jury is still out on whether local telecom competition will meet with the same fate.

In 1996, Congress set forth a clear path for fostering local competition, giving the Bells a chance to play in the highly coveted long-distance market in exchange for allowing their competitors access to the public switched telephone network. In theory this process should have worked remarkably well, as long-distance competition was the model. In reality, however, eight years of constant rule changes, enormous Bell lobbying pressure and the more recent explosive political wrangling have gotten in the way.

The smoke is clearing from the epic, battle to preserve wholesale network access rules. Washington bureaucrats have stripped brave competitive entrepreneurs of their legal rights to cost-based access to underlying portions of the public switched telephone network. And the ensuing uncertainty - as the FCC attempts yet another rewrite of the rules - is casting a dark cloud over the industry as a whole.

But there is one potential ray of sunshine poking through these thunderclouds: VoIP.

VoIP is an application - or service - that travels over existing broadband connections, and is being touted as a competitive, facilities-based alternative to the ‘old-fashioned’ circuit-switched network. VoIP is viewed as a more cost-effective means of transmitting voice calls, as a result of the technology used to deliver the service and the fact that it is in some cases - at least for now - exempt from access charges assessed on those using the circuit-switched network.

In one recent survey, respondents said it was apparent that the consequences of VoIP could be staggering. Use of VoIP could rapidly increase new service deployment and substantially change network architectures. And, for consumers VoIP is expected to reduce costs, offer users more innovative functions than they can get from their current service, and increase productivity.

Yet, despite the promise, there are numerous obstacles that could hinder the spread of VoIP and other yet-to-bedeveloped services designed to run across IP-enabled networks.

To appreciate those obstacles, it is important to understand exactly what VoIP is. VoIP is not a new network or facility, it is solely an application that runs over existing networks or facilities.

That said, if the Bush administration, Congress and the FCC are serious about promoting VoIP as a competitive alternative, they need to ensure their laws and policies promote deployment of alternative broadband networks and allow for competitive access to those facilities.

Currently, broadband lines into the home principally are controlled by the incumbent Bell monopolies or incumbent cable providers, which are now exploring the use of VoIP themselves. As these Bell and cable company initiatives progress - and standalone VoIP providers, such as Vonage, meet with success - there is no doubt that the incumbents controlling those critical last-mile connections to the home undoubtedly will seek to shut out alternative VoIP providers from delivering their services across those lines.

In this nascent stage, it is important for the Bush administration, Congress and the FCC to foster competition via these new services by ensuring that consumers can receive VoIP and other IP-based services no matter which provider they choose.

The best way to achieve competition through a diversity of service providers and promote greater broadband deployment is for lawmakers and regulators to avoid hampering VoIP and other IP network-dependent applications with burdensome regulations.

In its VoIP Policy Principles, Comp- Tel/ASCENT endorsed the credo that all VoIP services should fall under federal jurisdiction.

Moreover, since VoIP is an IP-based application, it should be classified not as a telecommunications service but as an information service, which would exempt it from other onerous regulations.

Most importantly, however, to achieve robust competition based on new applications such as VoIP, all providers must have access to the last-mile bottleneck facilities at cost-based, wholesale rates. In FCC comments filed, CompTel/ASCENT proposed that the FCC take a ‘layered approach,’ which would ensure the underlying network and transport facilities remain available to all providers, while the applications and content running across those pipes are minimally regulated.

The association noted that any regulation of IPenabled services should focus on guaranteeing all providers access to loops, transport and other bottleneck facilities to the extent governed by Sections 251 and 271 of the Telecom Act or state laws.

CompTel/ASCENT also urged the FCC not to prematurely lift rules governing incumbent telcos’ retail services, and to be wary of their attempts to tie IP applications with the underlying facilities.

CompTel/ASCENT also proposed that regulators revamp the current intercarrier compensation regime. Any new intercarrier compensation plan should provide incentives that will ensure traffic is routed and terminated in the most efficient manner and in a way that provides performance comparable to that expected in a competitive wholesale market.

These issues and others - such as universal service contributions, E911 compatibility and law enforcement’s ability through CALEA to monitor VoIP calls in the interest of national security - are being debated at the FCC and in Congress.

The FCC has initiated two rulemakings: one on IP-enabled services and another on CALEA. And lawmakers on Capitol Hill are considering legislation and hosting hearings on the deployment of VoIP and other advanced services.

As these matters are addressed, it is important that any policies or laws are easily applied to all network configurations capable of carrying VoIP traffic. Likewise, while the main objective of any action should be to foster - not constrain - adoption of innovative applications, such as VoIP, there is an equally important second goal. The additional objective is to ensure that any regulations deemed necessary are: clearly understood by network service providers; capable of implementation by service providers across all network architectures; and objectively enforceable by regulators and/or co-carriers.

The chaos ensuing the D.C. Circuit’s decision to jettison the pro-competitive portions of the FCC’s Triennial Review Order has done much to crater the landscape, making market entry a lot more risky - if not fatal - for those attempting to bring competitive alternatives to consumers. The VoIP debate, however, presents a prime opportunity for the terrain to become less foreboding to the entrepreneurs willing to take the first step.

H. Russell Frisby Jr. is CEO of CompTel- /ASCENT, a Washington, D.C.-based trade association, representing facilities-based carriers, providers using unbundled network elements, global integrated communications companies, and their supplier partners.


Callipso Corp.
Covad Communications Group Inc.
ITC^DeltaCom Inc.
KMC Telecom
Sprint Corp.
Vonage Holding Co.

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