The MisEducation of AT&T 

The Internet is AWESOME.  But it isn’t everything.  IP technology is AWESOME.  But it isn’t used only on the public Internet.  This distinction is key.

Members of The Broadband Coalition met with the FCC last week to lay out a framework for what needs to be done in order to make sure our nation’s communications networks continue to transition to the most efficient technology available.  More often that not, the most efficient technology utilizes some form of packet-mode technology.   “IP,” which stands for Internet Protocol, is a kind of packet-mode technology.

AT&T and Verizon want to label everything as the “Internet” in order to advance their agenda of eliminating their competition.  They claim that Congress didn’t anticipate the Internet or even that technology would continue to evolve as it always has.  It follows, they assert, that the Telecommunications Act of 1996 does not apply to evolving technologies, including IP.   In other words, following to their arguments, Congress passed a law that was outdated almost the moment it was passed.  This flies in the face of logic and fact.  This nation has witnessed awesome advances in technology, innovation that was unleashed, as anticipated, with the passing of the Telecom Act and other market-opening policies.  It is true that the FCC has some outdated and misguided policies -- those that are not technology neutral need to be addressed, and competition policy does need to evolve.  We can all agree on that.  But this isn’t about the public Internet.

So, if it’s not the Internet, what is it?  Communications providers are quickly replacing older transmission protocols with “packet-mode” technology.    Packet-mode technology refers to the way information is passed along a communications network.  Again, IP is a common packet-mode “protocol” used to pass different types of communications (our email, our telephone calls, medical images between health care professionals, music downloads) from one place to another.   And while IP technology is used to pass information along the public Internet, this technology is not limited to the Internet.  This and other evolving packet-mode technologies are used to complete voice calls and transmit data on networks that never touch the public Internet. 

Although AT&T and Verizon devote a great deal of resources to confusing this issue in their political advocacy, when it comes down to actually describing their services, they are clear – some services never touch the public Internet. [1]  Many of our critical communications never touch the public Internet.  And for good reason.  Despite the enormous value provided by the Internet, it is a not a secure network.  In order to access secure cloud-based services, to ensure medical images are securely sent between health care professionals, to back up and secure financial transactions, and to exchange voice traffic, service providers deliver communications products over managed networks – not the public Internet.    

The Broadband Coalition is dedicated to ensuring businesses across the nation continue to have competitive options for their communication needs.  As the new entrants to the local business markets, we have driven innovation by deploying networks and products using today’s advanced packet-mode technologies.  We strongly support updating the nation’s communication policies to ensure a transition to packet-mode technology, including IP, for communications networks other than the public Internet.  But, these decisions need to be based on fact, not on misleading advocacy tactics designed to confuse the conversation. 

- TBC Editor

[1] “AT&T U-verse Voice service is provided over AT&T's world-class managed network and not the public Internet. Using one network to provide U-verse services enables AT&T to provide high quality service. Voice over IP ("VoIP") providers who utilize the public Internet are less able to control the traffic and ensure voice quality…. With AT&T U-verse Voice, although you can use your high speed Internet service to manage your AT&T U-verse Voice features, the voice packets do not traverse the public Internet.” (emphasis added).

“To understand the features and quality of FiOS Digital Voice, you first need to know that the service is not the same as the services you get with a little Internet adapter for your modem and phone, and it does not ever touch the public Internet.” (emphasis added)


All Tricks, No Treats

Just when you think the hypocrisy of the big, legacy telephone companies can’t get any worse, along comes the “The Internet Transformation Panel.”  If you believed the panel was providing the public with unbiased opinions, don’t feel bad: it was designed to create that impression.  But since this is DC, the truth is a little more complicated.  In fact, it’s pretty much the opposite.  The Internet Transformation Panel was hosted by an organization funded by the phone companies, was stacked with people paid by them and the “discussion” was a scripted reading of the giant phone companies wish list.   

Even the name is a lie.  The panel wasn’t about the Internet at all.  Instead, it was a front for phony phone company arguments designed to eliminate the competitive policies that govern such basic obligations as connecting networks to one another so everyone can talk.  This shouldn’t be surprising since the long-term Bell plan has been to avoid the cost of innovation by using government to beat their competitors rather than fighting it out in the marketplace.  It’s a shame they would rather invest in lobbyists than new technologies for their customers, but there you have it: the attitude of companies that have monopoly thinking baked deep into their bones.

So where is innovation today coming from?  Competitive technology providers.  We are the companies that drove the big, legacy telephone companies to deploy DSL and Ethernet, drove down the price for residential broadband, built the first all-IP networks to serve small and medium businesses with cutting-edge technologies, developed products that allow customers to purchase the amount of bandwidth they need for the day, the week or the month – on demand; launched—just recently—the first nationwide 100G services and began providing innovative cloud solutions to the small and medium businesses responsible for generating most of our nation’s new jobs.

There’s a pretty simple lesson in here: competition drives innovation.  Thankfully, Congress had the foresight to make sure the 1996 Act and all that came with it is technology neutral.  It doesn’t matter whether packets are traveling over copper or over fiber, and it also doesn’t matter if those packets are organized using TDM or IP technology, or some future, yet to be invented protocol.  It’s all the same to the 1996 Act and to the wires.  The FCC simply needs to continue enforcing technology-neutral policies governing last mile connectivity and interconnection.   This, in turn, will enable America’s most innovative technology providers to offer lower prices and the kind of technology breakthroughs that can truly transform business and create new jobs.  If the FCC fails to enforce the law, hundreds of thousands of American businesses will lose their service provider and lose the opportunity to be part of the next wave of technology innovation.

Don’t let the big, legacy telephone companies fool you.  Their paid consultants may be staging little community theater performances as another venue for trumpeting their tired refrain of “subsidize us and eliminate our competitors,” but that’s all they are: performances.  What they want today is the same thing they have always wanted: a world in which the rules just don’t apply to them and competition is a thing of the past.  We can’t let them get their way.  America’s job-generation engine—the small and medium businesses of the United States—are counting on us to help them reach the future by connecting them to the world with the most advanced technologies available.  We can’t let them down.

- TBC Editor




From streaming video content as an alternative to traditional video providers, to leveraging multiple vendors in e-commerce, to connecting grandparents to grandchildren via FaceTime rather than traditional phone lines, everyone wins in a competitive broadband market.  And as a competitive market clearly leads to rising broadband speeds with falling costs, even more important is the role faster, affordable speeds play in spurring innovation and economic growth across the country.  Much like people can’t imagine life without electricity and modern plumbing, broadband is now an indispensable input into American life and our global competitiveness.  And while all this growth and dynamism may seem too good to be true, retracing the steps on how we got here helps ensure we continue down this path.

If the course of telecom “evolution” had been left on its former path for most of the 20th Century, America could have been light years behind in technological progress instead of the global broadband pioneer we are today.  Fortunately, there were two seminal events that changed the course of history, igniting competition and unleashing the innovation that connected everyone, everywhere, all the time.  Starting in 1982, when Judge Harold Greene oversaw the break-up of the Ma Bell monopoly, the result was seven regional providers that couldn’t provide long distance (but still had a choke hold on the local market) and a long-distance provider that couldn’t offer local service.  New entrants were then able to provide an alternative long-distance service, and with competitive options for businesses and consumers we saw the beginning of the demise of high prices for long-distance calling.  Fourteen years later, Congress passed the Telecommunications Act of 1996 (“the ’96 Act”), which finally broke the local monopoly by allowing competitive access to the customer premises in exchange for local incumbent entry into the long-distance market.  This change accelerated the affordability of long distance – where today people don’t even think twice when calling across the country.  The ’96 Act also unleashed a whole new class of carrier, one that didn’t grow from the legacy monopoly tree and as a result had to win every customer through innovative offerings, more affordable products, or tailored services.    

But what does that innovation look like and how has competition helped?  Before competition was introduced into the telecom market, old Ma Bell had developed DSL as a means to transmit data at faster speeds than dial up.  Only, if they chose to sell this service to customers, it would have meant cannibalizing another, more expensive product: Integrated Services Digital Network or ISDN.  ISDN was a premium priced and very profitable service, where consumers were charged significant fees to connect an extra wire to their homes at expensive monthly charges.  After the passage of the ’96 Act, a new competitive entrant to the market, Covad, was the first carrier to deploy DSL to residential customers.  It was a huge hit.  People flocked to the new, fast and affordable broadband connection, causing incumbent telephone providers to abandon their more expensive plan requiring an additional line and were forced to offer DSL themselves.  Competition worked.  A decade later, after successfully closing off wholesale access to fiber optic lines, the Bells thought they’d have a monopoly on broadband connections to businesses.  But the competitors innovated again and worked with US-based companies to develop new technologies using the copper network and created super-charged connections.  Today over copper the copper network, we are seeing speeds up to 50 megabits per second (Mb/s).  In fact, some companies have even been providing connections at over 100 Mb/s, with engineers testing equipment that allows for connections even faster.  And once again, the Bell companies have followed and adopted this fast, affordable technology.  Simply amazing.

Broadband innovations continue to emerge in today’s competitive environment.  The most recent example is XO Communications’ launch of coast-to-coast 100 Gigabits per second (100G) backbone service in America.  XO is the first to reach this milestone coast-to-coast, and it’s the fastest broadband transport speed yet.  But this latest break-through is not being provided by one of the big, legacy telecom companies; it’s being provided by one of the upstart competitors.  These speeds will help address the growing demands driven by Internet video, higher speed Internet access, mobile wireless data, and the increasing number of Internet-connected smart devices.  It’s like water for those thirsting for faster speeds and greater capacities.  And it will spur even more innovation, and most certainly imitation.

What does this mean for the future?  Well, first it means that competition is a crucial ingredient in telecom innovation.  And based on what we’ve witnessed since the passage of the ’96 Act, we can clearly expect that competition will continue to spur positive change and consumer benefit in the telecom market.  In order for that to happen, the legal framework that ensures a competitive broadband market must be preserved.  Also, it means that policymakers should not buy the snake oil that the Bells are selling, that says only fiber can provide broadband speeds and that the copper network ought to be decommissioned.  Nor should regulators fall for the Bell argument that if the government simply subsidizes the incumbents and cuts off competition, the legacy companies will innovate in a vacuum.  History does not bear this out.  And of course such short-sighted, backward-looking policies are the exact opposite of what would benefit the US economy, and actually hurts technological innovation.  More wires, more connections, more competition is the correct telecom policy for this country, not fewer.  After all, if Ma Bell had her way in the 1990s, we’d probably still be overpaying for Internet access using an ISDN connection.

 - XO Communications



In the broadband world, believe it or not, copper is still king.  The same copper that encases the Statue of Liberty and that ancient civilization used to hammer into tools during the Copper Age makes up the wires that connect almost every home and building in America.  Copper wire is the “plumbing” of the broadband “pipes” of the Internet, which today enables blazing fast speeds for data, video, voice, and conferencing as well as cloud computing.  It is an indispensable ingredient to the twenty-first century digital economy.

We often – mistakenly – think of fiber optics or wireless spectrum as the only means to deliver broadband.  While it’s true fiber and wireless allow for high speed Internet connectivity, in reality, tens of millions of American homes and businesses connect to the Internet today via the copper network that historically only provided a dial tone.  This is the same wire that required telephone operators to make physical connections at a switchboard to complete a call, the same network that had the black rotary dial phone your parents or grandparents leased from Ma Bell, and the same path your dial up modem used to connect to AOL.  It may be hard to believe, but today over the existing copper network, you can connect to the Internet at speeds of over 40 megabits per second (Mbps).  If that sounds fast to you – it’s because it is.

In recent years, copper has been an overlooked national resource as phone companies have touted fiber and wireless as tomorrow’s Internet, seeking to decommission the valuable copper network at the expense of broadband alternatives.  But in reality, the number of homes and businesses that connect using copper dwarfs the number that connect via fiber, and even fewer use wireless only for their data.  To change that would be an expensive, time consuming, and inconvenient undertaking to dig up streets all across the country to lay new and costly infrastructure.  Instead, we can plug in new, American-made electronics to the copper network to deliver super-fast broadband speeds.  What does this mean for the future?  First of all, it would mean faster deployment of new broadband technologies, fewer service disruptions, and fewer closed streets and torn up sidewalks.  And if you apply Moore’s Law (that processing power doubles every two years) we can rightly expect that these broadband speeds will be even faster in the future.  

We’ve seen this movie before.  The advent of the internal combustion engine a century ago caused our cities to eliminate the streetcars that efficiently moved people to their destinations in favor of automobiles.  But the destruction of that rail network, in favor of another made of asphalt, only led to congestion.  Now, cites are rediscovering the benefit of that alternative network and wishing they hadn’t spent precious resources decommissioning the rail network, only to rebuild it at a later time.  We can look to this lesson as to why the preservation of our national copper infrastructure is important to accelerate America in to the digital future.   More wires, more connections, should be our mantra, not fewer.  Copper truly is king – long live the king.

-XO Communications


Anna-Maria Kovacs has provided us with a short descriptive literary sketch : an economic policy vignette reminding us how important the facts are in determining how millions of US customers and carriers will access broadband technology.  Unfortunately, while lecturing us on the need for current data she offers up findings that are not supported by data, are simply wrong on the facts and instead rely on unsupported claims made by companies like AT&T and Verizon.

Many of Ms. Kovacs’ assertions are inaccurate.  For example, she criticizes the FCC for limiting its review of the special access market to DSn services.  In fact, the Notice of Proposed Rulemaking that commenced the special access proceedings specifically includes packetized services such as Ethernet.  She also asserts that competitive carriers have argued that ILECs have priced retail DSn services too low to enable competition, but that too is incorrect.  Competitive carriers have argued that all ILEC DSn prices are too high and that high standard prices force competitors to sign up for volume/term discounts that lock up the market and harms consumers. 

The report is also plagued by unsupported, and implausible, assumptions.  For example, Ms. Kovacs assumes that the DSn services providing access to broadband technologies to the vast majority of US business customers today will somehow disappear from the marketplace in the near term.  She doesn’t offer a single fact to support this assumption. She includes a few slides from carriers that describe Ethernet services and their investment in broadband infrastructure – but nothing in these slides supports the unlikely notion that the DS1 and DS3 services AT&T, Verizon and CenturyLink sell today will suddenly be transformed into “Ethernet services over fiber networks.”  The slides offer no support for the assertion that “DS1 and Ds3 circuits are obsolete or being rapidly abandoned” (pg 7). Ms. Kovacs could have attempted to quantify the number of DS1/DS3 special access services sold by the ILECs compared to the number of Ethernet special access services sold by the ILECs. Had she made this obvious comparison she would have known that the overwhelming majority of special access services currently sold by the 3 large incumbents are DS1 and DS3 services.  To be clear, no one disputes that packet-based technology is the next generation broadband solution, but the transition from one technology to another does not happen with the simple swipe of a pen. There is no basis in reality, and Ms. Kovacs certainly provides none, for believing that DS1s or DS3s will be abandoned in the next few years – these services will continue to provide broadband access to the vast majority of business locations for many years to come. 

In addition,  Kovacs criticizes economic studies of the special access market conducted by the GAO and NRRI   but her own analysis of the market appears to be based on no relevant data or economic analysis at all.  For example, Kovacs asserts that the Ethernet market is competitive based on national market share data collected by Vertical Systems – in so doing, she fails to address fundamental issues of market analysis such as product and geographic market definitions and whether competitors to AT&T and Verizon actually rely on AT&T’s and Verizon’s own underlying facilities to provide services to their customers.

No one is saying that the networks aren’t transitioning to packet-based technologies.  Ethernet special access services deserve the FCC’s attention -- that we can all agree on.  But to pretend that the current US marketplace is being served by obsolete facilities is irresponsible and down-right misleading.  This FCC docket has more data and more market-based information than any in recent history.   Even Ms Kovacs concedes that the FCC’s data requests have been comprehensive.  But she quickly falls back on the  old mantra that somehow there is not enough data because some carriers did not respond to the data requests.  Any one familiar with the marketplace knows that the carriers that have relevant data are participating in the FCCs data requests.  There is no stealth carrier out there buying from or selling to the incumbents, wireless carriers, competitive carriers or enterprise customers at levels that will impact the findings of data collected by the FCC.

Unfortunately, Ms. Kovacs’ paper is not an economic analysis at all.  It is a simple advocacy piece that provides no data to support its conclusions.  Odd for a piece intending to tell us about the importance of current data.


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