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Regulation - What is it Good For? The Industry

Spectrum Winners and Losers

AT&T posted a short statement on their public policy blog called ‘Inconvenient Facts and the FCC’s Flawed Spectrum Screen’. In that blog post they complained that the FCC had failed to apply the spectrum screen to Softbank’s acquisition of Sprint and Sprint’s acquisition of the rest of Clearwire. And AT&T is right. The FCC has been incredibly inconsistent in the way it looks at wireless acquisition and mergers.

So what is the spectrum screen? The spectrum screen is a set of internal rules at the FCC that they use to determine if any wireless carrier owns too much spectrum in a given market. Historically the FCC had a generic rule that said that no one company could own more than one-third of the spectrum usable for wireless in a given geographic area. This spectrum screen was applied both to attempts of wireless carriers to buy new spectrum or to mergers between wireless carriers.

The FCC has been very inconsistent in the way they apply the existing screen. Last September they announced that they were going to look at the way the spectrum screen ought to work. But meanwhile, during the last year the screen has been applied (or ignored) in the following ways:

  • When the FCC looked at the proposed AT&T / T-Mobile merger they rejected the merger in part because they said that the acquisition would fail the screen test in 274 CMAs that covered 71 of the top 100 markets and 66% of the US population. However, the FCC fudged the spectrum screen in coming up with those numbers. At that time the spectrum screen set the maximum amount that any one carrier could own in one market at 95 MHz, which was one-third of the spectrum available for wireless carriers. However, in coming up with their conclusion the FCC lowered that threshold to 90 MHz in judging the merger. That might not sound like a big difference, but it lowered the number of markets affected by the merger by 84 and reduced the overall problem to less than 50% of the top 100 markets and 50% of the US population. That is still a lot of places where the proposed merger would have failed the spectrum screen, but AT&T had announced plans to divest of bandwidth as needed to meet the FCC test. The FCC made this change in the spectrum screen without any public input.
  • When Verizon acquired spectrum in the 1.7 to 2.1 GHz band the FCC applied this fully to their spectrum screen band. They did the same when AT&T acquired 2.3 GHz spectrum.
  • And then there is the recently announced approval for Softbank to acquire Sprint and Clearwire spectrum. The Clearwire spectrum at 2.5 GHz is right next to the 2.3 GHz spectrum recently acquired by AT&T. While the FCC fully counted the spectrum AT&T purchased against the spectrum screen, in the Softbank acquisition the FCC counted only 55.5 MHz of the Clearwire spectrum against the new Softbank spectrum screen even though there is an average of 140 MHz available in most of the Softbank markets.

So AT&T has a legitimate gripe. The FCC seems to apply the spectrum screen to get the results they want. It looks a lot more like the FCC is picking market winners and losers than they are protecting the public. The spectrum screen was established in the first place to promote competition. The FCC wanted to make sure that a given carrier did not get so much spectrum in a major market that they could effectively close out competition. They also didn’t want carriers to be able to hoard spectrum for future use. But the FCC no longer seems to be using market protection as the criteria of deciding who can and cannot merge.

It’s clear that the FCC didn’t want AT&T and T-Mobile to merge. They thought that it was bad for competition to lose one of the major carriers in the country. But it was wrong for them to fudge the spectrum screen as a way to justify their position rather than just oppose the merger on pure competitive grounds.

And in the case of Softbank they are going in the opposite direction. They obviously want a new competitor to AT&T and Verizon and they are ignoring the spectrum screen to make sure that happens.

Why does all of this matter? Like anything else it’s a matter of money. Wireless carriers have two ways that they can address congested conditions. They can just add more cell sites, closer and closer to the old ones. In effect spectrum is reusable and each new cell site uses the original spectrum freshly. The other solution is to just layer on a new spectrum in a crowded area so that no new cell sites need to be constructed. That is much cheaper than building cell sites, and so carriers want more and different spectrum in major markets to meet the seemingly insatiable and rapidly growing demand for mobile data.

The issue is going to get a lot worse. President Obama announced a new policy that will release up to 500 MHz of new spectrum for wireless use over the next five years. So there is going to be a new land grab by all of the carriers and the FCC needs to get ready.

It just seems to me like the FCC needs to toss out the spectrum screen and come up with a new way to determine the right amount of competition. In the two biggest merger cases before them in the last few years they blatantly ignored their own spectrum screen rules to get the result they wanted. That is evidence enough that we need to stop having the fiction of a spectrum screen. If the FCC wants to be in the game of picking market winners and losers they just need to be upfront about it.

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Regulation - What is it Good For? Technology

Who is a Cable Company?

wikipedia:RG-6 Wikipedia:Coaxial cable (Photo credit: Wikipedia)

There are regulatory battles that tackle issues of great importance, but there are also battles, which if brought to the public’s attention would leave them shaking their heads. Currently there is one such battle going on at the FCC.

The battle is a simple one that defines who is a cable company. This kind of regulatory battle comes up all of the time because of the nature of the way that regulation is written. Traditional cable TV has been around since the 1950’s when it brought network channels to remote rural markets which had no over-the-air reception. But the industry as we all now know it exploded in the 70’s when the industry was deregulated and new programming was created in the form of the many networks we now all watch.

As often happens, the FCC regulations concerning cable TV were written to be very technology specific. For many decades there was only one way to be a cable television provider, and that was to string coaxial cable to deliver cable signal to homes. The original cable technology got a major upgrade when fiber was brought into the network and most cable companies upgraded to hybrid fiber/coax (HFC) systems. But the new HFC technology still delivered the cable signal to the home using the same coaxial cables.

But then, as invariably happens with technology, something new came along. First were the satellite providers. They don’t use any wires and instead put satellites into low orbits and send the signal down to everybody that is under the satellites. And more recently came IPTV (IP-based delivery of cable signal using either DSL over copper wire or fiber). IPTV differs from traditional cable TV in that it typically only sends the signal to the customer for the channel they are watching while traditional cable transmits all of the channels all of the time. And there have been other technologies used during the years, such as several cable systems that were developed that beamed the signal to customers using a spectrum referred to as MMDS.

One would think that as new technologies are developed that do the same things as older technologies that regulations would just be changed as needed. After all, the general public doesn’t much care about the technology used to deliver their cable programming. I think most people would agree that a cable TV company is one that brings MTV and ESPN to their television.

And the technology is about to get a lot more complicated. First, many cable companies are upgrading their networks to become more digital and there are already trials of cable companies that are upgrading to IPTV across their coaxial cables. They are doing this to save more bandwidth to use to provide faster cable modem service. Would this mean they are no longer cable companies? And then there is the whole issue of people getting programming over the Internet. If I watch The Daily Show on my cellphone, is that cable TV? My guess is that no matter what the FCC does to change the definition of cable TV that it will be out of date in just a few years.

Technology differences are at the heart of a lot of FCC issues. For example, there are different rules now that apply to traditional long distance telephone companies versus those who use IP and the Internet to deliver telephone calls. A lot of the reason for these issues is that the FCC doesn’t get to make up its own rules in a vacuum. Many of the underlying rules that the FCC enforces are derived from bills passed by Congress. The FCC has a certain amount of leeway to interpret such rules, but they are also restrained to a great degree by stepping too far outside of Congress’s original language and intentions in the various laws.

As is often the case, this current dispute boils down to money. The FCC charges a fee per cable customer to pay for the cost of operating its Media Bureau, which oversees cable TV providers. Currently this fee is only assessed to traditional cable TV operators that deliver their signal to customers using coaxial cable. But the fee is not charged to the satellite and the IPTV providers. And both of those groups are huge. For instance if AT&T U-verse, which uses IPTV was classified as a cable company they would be the seventh largest cable provider. And the satellite companies are huge with over 34 million subscribers in 2012.

As usual, the various companies argue that there are differences that should keep them from being regulated as cable companies. For example the satellite providers don’t get involved in issues concerning hanging cables on poles. But honestly those kinds of distinctions are silly. There are differences everywhere among companies in every regulated industry. For example, there are many FCC rules that apply to the very large telephone companies that don’t apply to tiny telephone companies, and vice versa. And yet they are all considered to be telephone companies.

The similarities among cable providers are obvious. They all deliver a nearly identical product to consumers and they all pay a lot of money to programmers to get the content they transmit. And they are all regulated by the Media Bureau. Common sense tells me that any company that delivers cable programming to homes is a cable company and ought to kick in for the cost of regulation. I am not sure that I have ever seen any regulatory issue that makes me think, “If it quacks like a duck it must be a duck”.

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Current News Regulation - What is it Good For?

Switching in an IP Environment

FCC HQ (Photo credit: Wikipedia)

In this industry there are always interesting fights going on behind the scenes. In fact, it seems like a lot of the policies made by the FCC are in response to battles being waged between carriers. As the FCC intervenes in these fights they end up creating policy as they help solve issues.

This Letter is a correspondence with the FCC about a current dispute that is going on with Verizon and AT&T disputing the way they are being billed by Bandwidth.com. and Level3. This fight is an interesting one because it asks the FCC to affirm that is supports a migration to an all-IP network.

The dispute is over what is called OTT (Over-the-top) VoIP. OTT in this case means that there are voice calls being made from a service provider’s network for which the service provider is not providing the switching. Instead the service provider is buying switching from a CLEC like Level3. And all of the calls involved are VoIP calls, meaning that they are being delivered from the customers to the switching CLEC using the IP network rather than the public switched telephone network.

Here is how this might happen, although there are other configurations as well. The network in question is clearly an IP network to the customer in order for this to be considered as VoIP. That means it is either a fiber-to-the-home network, DSL over a copper network or a cable system that has been upgraded to send the voice over the data path. In a traditional TDM network the calls from customers are routed directly to a voice switch and that switch will decide what to do with the call based upon the numbers that were dialed. But in this scenario there is not a switch in the subscriber’s network. Instead, when a customer makes a call, a signal is sent to wherever the switch is located telling it where the customer wants to call. That remote voice switch then tells the network owner where to send the call. It is no longer necessary in a smartswitch environment for the call to actually touch the switch, but the switch is still the device that decides how to route the call.

The parties are fighting about whether access charges ought to be charged for an OTT VoIP call. Access charges are fees that long distance carriers pay at both the originating and terminating end of a call to compensate the network owner at each end for processing the call. Verizon and AT&T don’t want to pay the switching component of the access charges for these calls. They are arguing that since there is not a physical switch in the originating network that such charges aren’t warranted.

Broadband.com and Level3 are arguing that the switching is being performed regardless of the location of that switch. They point out that for the FCC to rule otherwise would be counter to the FCC’s desire for the telephony world to migrate to an all-IP environment.

If the FCC rules that AT&T and Verizon are right, they will be saying that a carrier performing a switching function on legacy TDM technology can bill for performing that function but that somebody doing it more efficiently in an IP environment cannot. I just published a blog yesterday talking about ways to share a softswitch and that is exactly what is happening in this case. In an all-IP environment the network can be more efficient and not every carrier needs to buy and operate a switch. They can instead contract with somebody else to switch calls for them which is easy to make happen in an IP environment. Access charges are designed to compensate local carriers for the cost of performing certain functions and one has to think that the network owner in this case is still having to pay for the switching function and should get to recover some of that cost.

In fact, there has been switch sharing for years even in the TDM world. I know several rural LECS who lease switching from their neighbors and who have not owned a switch for decades, and they have always billed the switching access charge element. That element reimburses you for the cost of switching and it really shouldn’t matter if that cost is made up of the depreciation on a box you paid for or else a fee you pay to use somebody else’s box. Cost is cost and the key fact is that calls can’t be made or received from an area if somebody isn’t doing the switching.

I always find arguments by the large RBOCs to be interesting because they wear many hats. AT&T and Verizon are wireless carriers, LECs and long distance companies, and often when one part of the large companies make regulatory arguments it will be contrary to the interest of one of the other branches of the company. In this case the long distance branches of the RBOCs are looking for a way to avoid paying access charges. But the LEC side of both Verizon and AT&T share switching and they do not have a switch any more for every historic exchange area. So to some degree these companies are arguing against something that another branch of their company is doing. And this is often the case in many regulatory arguments since these companies do so many things.

Hopefully the FCC will agree with Broadband.com and Level3. If they rule otherwise they will be telling carriers that it is not a good idea to establish switch-sharing arrangements that are more efficient than having every carrier buying the same expensive boxes. If the FCC really wants the telco world to move to IP they need to get rid of any regulatory impediments that would make an IP network less desirable than a legacy network. Hopefully the FCC sides with efficiency.

Categories
Regulation - What is it Good For? Technology

Serving Hard-of-Hearing and Deaf Customers

English: A Deaf, Hard-Of-Hearing or Speech-Impaired person at his workplace, communicating with a hearing person via a Video Relay Service video interpreter (a V.I., a Sign Language interpreter, shown on-screen), using a videophone. The hearing person with whom the video interpreter is also communicating can not be seen. The videophone camera rests above his computer monitor. Note as well the additional videophones on his desk. (Photo credit: Wikipedia)

The 21st Century Communications Video Accessibility Act of 2010 expanded the obligations of carriers to increase the access of persons with disabilities to modern communications. The CVAA makes sure that accessibility laws enacted in the 1980s and 1990s are brought up to date with 21st century technologies, including new digital, broadband, and mobile innovations. This expanded requirement to provide voice communications to include VoIP, text messaging, e-mail, instant messaging, and video communications.

This law covers a number of different types of disabilities, but today I will just discuss what this law means for a carrier when dealing with hard-of-hearing or deaf customers. In order to understand your obligations you must first understand how hard-of-hearing and deaf people communicate with others.

Today, the preference for communicating between two hard-of-hearing or deaf people, or with somebody who knows American Sign Language (ASL) is to use Skype, Apple Facetime, or one of the many other web-based services that allow the called parties to see each other. But when hard-of-hearing or deaf customers want to communicate with anybody else they have to use one of the more traditional methods.

There are two basic systems in place for placing calls between hearing and non-hearing people.  Telephone Relay Services (TRS) was a system started in the 80’s that created a call center of live operators who act as intermediaries for calls between a deaf caller and any other person. In this system the deaf caller uses a device known as a TDD that allows them to type to the operator, who then reads what is typed to the called party. In the other direction the operator types whatever the non-deaf party says and sends it to the TDD device.

Since 2000 the states have all created Video Relay Services (VRS) where the hard-of-hearing or deaf caller uses a video phone or camera system so that they can be seen by the operator. This allows the deaf caller and the operator to both us sign language to communicate, which greatly speeds up the process.

Video Relay Service has mostly supplanted Telephone Relay Service. For example, in Virginia (and each state runs their own centers) VRS centers carried over 65% of the hard-of-hearing and deaf minutes in 2012. One would suppose that in a few years that TRS centers will become obsolete.

So what are the obligations of a carrier in providing calling to hard-of-hearing and deaf customers?  I believe your obligations are as follows:

  • You must be ready to inform a hard-of-hearing customer about their options on how to connect to TRS or VRS centers. The connection methods are different in each state.
  • To the extent that customers cannot afford the equipment needed to make these connections you must provide it. However, there is $10 million annual funding as part of the new TRS fund (the USF fund) which may reimburse you for any such costs.
  • You are required to keep records of inquiries and complaints by hard-of-hearing or deaf customers and must maintain these records for five years.
  • Any connection you make to advanced 911 must be made available to hard-of-hearing and deaf callers.
  • If you provide closed caption programming on a cable system, those same obligations must be met if you stream the same content on the web.
  • Any emergency alerts on your cable system must be broadcast both in writing and orally to accommodate hard-of-hearing and blind customers.
  • If you offer Video on Demand or VCR recording of programming, they both must capture the closed captioning for later playback.

I will cover requirements for blind customers in another blog. Those requirements are somewhat more complicated. Contact us if you want more information or if you want to understand how to get funding for hard-of-hearing equipment from the TRS Fund.

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Improving Your Business Regulation - What is it Good For? The Industry

It’s Still a Regulated World

It seems like every few weeks I have a conversation with a carrier and in the course of conversation I find out that they are not in compliance with some regulation or another. It seems like a lot of companies that sell VoIP services, in particular, think that somehow that makes them immune from regulation.

But regulation has not gone away. If you bill an end-user customer for a voice, data or video product then there are regulations that you have to comply with. If you are an ISP for other entities, even if those entities are large, you are subject to some regulation. The only category of carrier that might not be subject to regulation is what I call a carrier’s carrier, and who only serves other carriers as customers. And in some states even they are subject to regulation.

It matters that you follow the rules. It seems like regulators at both the state and the federal level are getting surly about offenders and there some big fines being handed down to carriers who ignore regulation. I think the cost of compliance is cheaper than the cost of getting caught.

Here is a sample of the kinds of federal regulations that we see carriers ignoring. There are other state requirements that are also being ignored:

  • CALEA. There are significant obligations to be read to immediately give access of your customer’s voice and data records to law enforcement. You must have a manual filed that describes the processes.
  • CPNI / Privacy. You must have a manual and processes describing how you will protect your customers’ privacy.
  • Red Flag. You must have a manual and processes in place to demonstrate how you will protect your customers from identity theft.
  • Net Neutrality. There is very specific information about your company, your products, your network and your technology that you must inform customers about.
  • 21st Century Communications Video Accessibility Act. You must file a plan on how you will help disabled customers get access to voice, video and data products.
  • Universal Service Contributions. We find carriers that should be contributing to the USF fund who are not. The fines for getting caught for this can be huge.

I told my readers that I wasn’t going to write too many blog entries that are direct sales pitches for CCG services. I will admit that many of my blogs hint at the services we offer, but the main intentions of these blogs is to discuss issues for carriers that I think they will find to be useful. But in many cases CCG is able to help clients with a lot of the topics discussed in my blog.

CCG has three regulatory products that make it easy for anybody to stay in compliance with the rules. We have many clients who use CCG as their regulatory arm and many have said that it’s far cheaper to use us than to do it themselves. Here are the three products you ought to consider if you want to hand make sure that you are in compliance with the regulatory side of the business.

Regulatory Assessment. We will do a one-time assessment of your business and tell you every regulation that we think applies to you. Why guess if you are in compliance. For a modest fee we will make a list.

Regulatory Compliance Monitoring Service. In this service we develop a calendar for your company and we remind you of every regulatory deadline you must meet during the year.

Regulatory Compliance Filing Service. If you want it, we can create all of the needed paperwork and manuals, fill out the quarterly and annual forms and file everything for you. We think we have some of the best prices in the market for this kind of work.

If you want help to get into regulatory compliance or stay incompliance, give Terri Firestein of CCG a call at (301) 788-6889. We can help you take regulatory worries off your plate.

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Current News Regulation - What is it Good For?

Supreme Court Backs FCC in Cell Tower Dispute

English: Antonin Scalia, Associate Justice of the Supreme Court of the United States (Photo credit: Wikipedia)

On Monday the Supreme Court ruled in favor of the FCC in a dispute about rules concerning permits for new cellular towers. The Supreme Court ruling is here: Arlington vs. the FCC.

The dispute arose over the FCC’s interpretation of their powers. The Telecommunications Act of 1996 had granted some local rights for zoning and placement of cellular towers. But the Act also said that local jurisdictions had to act “within a reasonable amount of time” in acting on requests for new tower sites. The FCC got a number of complaints from cellular providers over the years that local jurisdictions were dragging their feet and not responding to requests for new towers. The FCC responded by issuing a ruling that local jurisdictions had to act within 90 days to process a collocation application to add to an existing tower and within 150 days for a request for placing a new cellular tower.

The City of Arlington, TX, joined by San Antonio, San Diego, Los Angeles and other cities then sued to block this regulation, making the argument that the FCC was overstepping its authority in making the ruling.

The Supreme Court ruled 6 – 3 in favor of the FCC with an opinion written by Justice Antonin Scalia. This leaves in place the Fifth Circuit’s ruling that the FCC was within its jurisdiction to issue these rules. The FCC original ruling had said that a local jurisdiction could not reject a cell tower application due to the presence of another carrier, and that it also had to act within the above-mentioned time frames.

There have been a number of disputes about the location of cell towers. People all want good cell service, but nobody seems to want a tower in their back yard (or within sight of their back yard). The original cell tower systems were designed for a very different world than what we live in today. The originally sited towers in many places are far apart and were designed to handle a far smaller volume of voice traffic. And the original siting of towers is not at all adequate for data coverage since the strength of the data signal from a tower decreases quickly as you get further from a tower. To make the cellular networks do what customers want today, cell phone companies have to build additional towers within the boundaries of the older towers to create smaller ‘cells’ around each tower site. Each ‘cell’ can serve the same number of voice and data customers, so with more ‘cells’ a cellular company can accommodate more customers and provide better coverage and faster data. This problem is just going to get worse as more and more people rely on data for their mobile devices and we need more and more cell sites.

Eventually in the future the large ‘big stick’ towers will probably go away and be replaced by numerous small cellular transmitters dispersed throughout a neighborhood. But a full transition to that kind of technology is at least several decades away. And even after that is introduced the existing tall towers will probably be kept in service for an additional decade or two simply because they work well.

The ruling will have only a minor impact on the cell phone industry. Cities will no longer be able to use administrative delays as a passive-aggressive tool to say no to a new cell tower. Cities will still have the power to say no to a request for a new tower as long as they do it within the FCC timeline.

The real impact of the ruling is that the Court has backed the FCC and other federal agencies in the way that the agencies make their rulings. Most of the Court’s discussion centered around a doctrine known as the Chevron doctrine. That has meant that whenever a Court has been asked whether a federal agency has interpreted a ruling from a federal agency the Court has first asked if the underlying law was clear, generally being some law passed by Congress. If the law was not clear, under the Chevron doctrine the Courts have then generally deferred to agency’s interpretations of the law and have found in the past that federal agencies had the authority to interpret ambiguity in the law.

The Cities in this case had argued that the deference that Courts had granted to federal agencies could not constitutionally apply if the agency had no authority to act at all. They argued that this interpretation of the law effectively gives federal agencies the ability to define their own powers. This ruling addresses that question and says that Chevron does not apply to jurisdictional questions about the authority of an agency to make rulings. The Court did concede that their ruling does not give an agency the right to regulate as it pleases and that Courts interpreting Chevron in the future must do so by “taking seriously, and applying rigorously, in all cases, statutory limits on agency authority.”

Justice Roberts, joined by Justices Alito and Kennedy, wrote a dissent and he argued that the jurisdictional test that the cities had proposed was correct and that federal agencies are widely overstepping their authority.

While the ruling doesn’t do much for the cell phone companies it is a victory for the FCC and other federal agencies. I don’t follow what goes on at too many other agencies, but it seems like almost every major decision made by the FCC in the last decade has been challenged in terms of the agency even having the authority to issue rules. This Court ruling bolsters the FCC’s ability to interpret their own authority within the bounds of the specific laws they are implementing. But it does not give them unlimited authority and they still must act reasonably. Courts will still be able to review complaints against the FCC and other agencies, but they will have to do so by applying the Chevron test.

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Current News Regulation - What is it Good For?

Should the FBI Be Able to Wiretap the Internet?

There is currently a government task force that is working on proposed legislation that would give the FBI the ability to ‘wiretap’ data. This is very different from what is available today. Today, ISPs are required to comply with the ability to turn over electronic records by a series of laws referred to as CALEA, which is from the Communications Assistance for Law Enforcement Act. Under a CALEA an ISP might turn over emails or a list of the web sites that a given customer has visited. ISPs generally retain such data for 60 – 90 days for all customers and it is then automatically deleted unless law enforcement requests it. But CALEA requests generally are for historical data and are not ‘wiretaps’ when it comes to data usage. This new proposal would give law enforcement live access to a customer’s data in the same way that phones have been historically wiretapped. And this is a law with teeth. The proposal includes a $25,000 per day fine for companies who aren’t wiretap capable, with those fines doubling after 90 days for non-compliance.  There are a number of issues with this idea.

It Goes Against the Direction of the Industry

The business world is rapidly heading to the cloud with data. There is a long list of benefits of using the cloud and businesses get it. But before a business will send sensitive data out of their control into the cloud they generally encrypt it (or they should). Companies are not going to put sensitive financial data, trade secrets and things like legal correspondence into the cloud if there is any chance that other parties can somehow crack and read the data. The whole point of encryption is that only the parties involved can unencrypt it.

It seems like the FBI law would forbid this kind of encryption. This would have a ton of ramifications on the industry. Businesses are going to refuse to put sensitive information into the cloud if it can’t be encrypted. This means that they will probably continue to use company-specific LAN storage rather than the more efficient cloud. Further, company lawyers are going to advise companies to not use the cloud if everything there can be wiretapped. Today a subpoena is required to get information that a company keeps on their own servers. But a wiretap at an ISP could be done without the knowledge of the person or company being investigated. No corporate attorney is going to agree to let a company expose themselves to being investigated through the back door just to gain the advantages of using a cloud service.

The FBI’s idea will also put all of the companies that supply encryption out of business. There are a number of businesses that sell encryption to cell phones such as Cryptocat, Silent Circle, Red Phone and Wickr. There are many software packages that can be used to encrypt data files such as Folder Lock, SensiGuard, Safehouse, SecureIT, Cryptoforge and many others. And almost every maker of carrier class transmission equipment, servers and related software has an encryption product.

It’s Costly

One of the biggest issues with the proposed bill is that it casts a far wider net of companies who must comply with a wiretap than who must comply today with CALEA. Today CALEA applies to the companies that supply a basic data pipe to a customer, to whoever is the physical ISP. This may be a telephone company, cable company, wireless ISP or cellular provider. But every firm who must meet CALEA today is a carrier of some sort. They have a physical hub where they perform ISP functions. These hubs are the sort of places where CALEA makes sense.

But the proposed law would impose a more complex obligation on other web-based platforms like Facebook, Google, Yahoo and AOL. Those are all big companies and one might assume that they can all afford to do this, and you might be right. But the same requirements would apply to much smaller firms and start-ups who store and or process customer data. It’s going to be technically challenging for a web-based platform to give live access to data. They just are not configured that way. And the cost to design a system to enable that is going to be costly and inefficient.

The cost of compliance will deter future small start-ups. And if you don’t think that is true, let me give you a real life example of when CALEA costs became an issue for a small carrier. It is very difficult for a small ISP to comply with CALEA on their own, so there are companies who sell CALEA compliance. If you get a CALEA request they overnight you a black box that rides next to your core servers and captures the data that law enforcement wants. This kind of service costs about $600 per month. I have a small City client who wanted to become an ISP just to serve themselves, some other local government agencies and some non-profits. Since they were facility-based using their own servers then CALEA applied to them. They almost decided against doing this since the CALEA fees ate up most of the monthly savings they were trying to bring to their town. I know that is a very tiny dollar example, but I foresee the new requirement to be much more costly than CALEA. Small firms will have a very difficult time creating the ability of live data wiretaps and this is going to stifle small web firms.

It Goes Against the Basic Premise of the Internet

The main premise of the Internet is that it is a decentralized network. The wiretap proposal relies on some of centralized hub in order to implement a wiretap. There has to be a place where you can guarantee that the data the government wants to see will flow. That is a whole lot harder than it sounds and it would end up resulting in some fundamental changes in the way that Internet traffic flows. And that could be the costliest impact of all.

The traffic on the Internet keeps growing at nearly exponential rates. Carriers have been able to keep up with the bandwidth demands because they have upgraded the networks to be more and more efficient over time. This change would go in the opposite direction and would make the network more inefficient.

I fully understand and appreciate the needs of law enforcement. But this could be one of the biggest unfunded mandates ever if it ends up impeding the efficiency of the Internet. The Internet is now a fundamental part of everyday life and is a lifeline for most businesses.

It just seems like a colossally bad idea to me to impose a costly change on everybody that is intended to only catch a few bad guys. Particularly when the smart criminals will avoid these wiretaps. They will find a black market way to self-encrypt their data or they will avoid the web altogether. So this is really just a proposal to catch the dumb criminals. It seems like too great a cost for such a paltry goal.

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Current News Regulation - What is it Good For?

Diminished Clout for Rural Telcos

There were two recent announcements in the industry that has to have the rural telephone industry shaking their heads a little. The announcements are not specifically negative, but they are indicative of the fact that the industry has lost a lot of influence in Washington.

First, the president has announced the nomination of Tom Wheeler as the new head of the FCC. His background is as a high-powered lobbyist, and he was the head of both the National Cable Television Association (NCTA) from 1979 to 1984 and CTIA – the Wireless Association from 1992 to 2004.

His nomination has come with mixed reviews from the industry with many fearing that he will favor issues that promote the wireless industry. But there have been others who know him who think he will be a fair arbiter and will step up to the position. As someone in the industry I obviously share the trepidation that he would prefer one industry over another, and I would have the same concern regardless of which industry he formerly lobbied for. I’m not a big fan of putting lobbyists into powerful government positions overseeing the industry they once represented. That just seems to be asking for trouble and at the very best adds complication to every decision they make in their new role. I can certainly see how small telcos in particular could feel uneasy about this nomination.

The other news I saw was that Representatives Peter Welch (D-Vermont) and Bob Latta (R-Ohio) announced the formation of a bipartisan working group as part of the Energy and Commerce Committee that was going to focus on rural telecommunications issues. The group will be known as the Rural Telecommunications Working Group.

This new group is going to focus on a range of issues including call completion (meaning making sure that everybody can call everybody), broadband access and speeds, and wireless spectrum.

Other members of the Rural Telecommunications Working Group include: John Barrow (D-GA), Bruce Braley (D-IA), G.K. Butterfield (D-NC), Lois Capps (D-CA), Bill Cassidy (R-LA), Renee Ellmers (R-NC), Corey Gardner (R-CO), H. Morgan Griffith (R-VA), Brett Guthrie (R-KY), Adam Kinzinger (R-IL), Billy Long (R-MO), Ben Ray Lujan (D-NM), Doris Matsui (D-CA), Jerry McNerney (D-CA), Lee Terry (R-NE), and Paul Tonko (D-NY).

It is certainly good that Congress started this working group, because having anybody look at rural issues is a positive. But I did notice that there are more representatives in the group from large urban states than there are from truly rural areas. Any old-timer (like me) with a rural telco background will remember that there used to be a strong coalition in Congress who fostered rural telephony issues. But in recent years the rural telecom support in Congress largely faded away, due in part to retirements of Congressmen who supported rural telephony and due to other factors like the growth of the wireless industry. I appreciate that this new group has been formed, but it makes me remember a day when rural companies could depend on the support of Congress.

These two announcements made me realize that the political world has changed as much as the technological world for the rural telco industry. When I got into the telecom world there was no such thing as a cell phone, and now somebody who was the head lobbyist for that industry might be the next head of the FCC. Who woulda thunk it?

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Regulation - What is it Good For? Regulatory Alerts

Regulatory Alert: Annual Access Charge Reform Tariff Filings Coming Due

Seal of the United States Federal Communications Commission. (Photo credit: Wikipedia)

The second year of access reform is here again and most LECs and CLECs will need to file revised access rates by July 1. However, you should be aware that many State Commissions have their own requirements and time frames that need to be addressed in advance of the FCC’s date. As an example, the Public Utilities Commission of Ohio is directing that all affected ILECs and CLECs file the appropriate intrastate tariff amendment application or letter of compliance on or before May 1, 2013. This alert is to warn that in many states you are not going to have the luxury of waiting until July 1 to file your rates.

These filings are due to FCC Report and Order (WC Docket No. 07-135) which adopted a transitional intercarrier compensation restructuring framework for both intrastate and interstate interexchange and reciprocal compensation telecommunications traffic. In its recent March 26, 2013 release (WC Docket No.13-76) the FCC established procedures for the 2013 filing of annual access charge tariffs and Tariff Review Plans (“TRP”) for price cap ILECs, rate-of-return ILECs and CLECs that benchmark rates to price cap or rate-of-return ILECs. The Order sets an effective date of July 2, 2013 for the July 2013 annual access charge tariff filing. The Order establishes May 17, 2013 as the date that price cap ILECs must file their short form TRP. Affected ILECs and CLECs may make their tariff filings on either a 15 or 7 day notice (prior to the effective date) therefore affected ILECs and CLECs filing on a 15 day notice must file on June 17, 2013 and those filing on a 7 day notice must file on June 25, 2013. All filings must be made using the FCC’s Electronic Tariff Filing System (“ETFS”).

You also need to be aware that as part of the annual access charge tariff filing carriers will need to include the universal service charge contribution factor for the third quarter which begins on July 1, 2013. Note that in accordance with 47 C.F.R. § 54.712 of the FCC’s rules “…if a contributor chooses to recover its federal universal service contribution costs through a line item on a customer’s bill the amount of the charge may not exceed the interstate telecommunications portion of that customer’s bill times the relevant contribution factor.”

If you need help with these filings let us know. CCG also offers a service we call Regulatory Compliance where we notify our clients each year of every regulatory filing they need to make. It’s affordable and a great way to make sure that you meet all of your regulatory filing requirements.  Call Terri Firestein at CCG if you need help or want more information. She is at (301) 788-6889.

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Current News Regulation - What is it Good For?

Kansas Deregulation

On March 27 a bill passed (HB 2201) the Kansas Senate that largely deregulated telephone companies in Kansas from being the carrier of last resort. The bill passed the Senate by 36 – 4 and passed in the House by 118 – 1. In the past telephone companies were required to provide telephone service to most customers who wanted service, with some limitations that applied to extremely rural customers. But the new bill provides a host of ways that can excuse a phone company from providing service.

The bill applies to all regulated telephone companies, but also to a lot of other companies that provide telephone service like cable companies and CLECs.

“I think we’re at the point where we can take one of our largest carriers (AT&T) and treat them as if they’re a wireless carrier or cable carrier,” said Sen. Pat Apple, the chairman of the Senate Utilities Committee.

House Bill No. 2201 (click to open .pdf) is the Senate-approved version of the bill. Since the Senate made changes it will have to return to the House for final approval or else go to a House-Senate conference committee if the House doesn’t accept the Senate’s changes.

It’s unclear how the bill might have changed the role of the Kansas Corporation Commission (KCC) who currently regulates telephone companies. Currently the KCC has the authority to ‘prevent fraud’ but the bill changes that authority to ‘investigate fraud’. It’s not clear if the KCC will have any authority to affect the behavior of a badly performing telecom provider, as is already the case with cellular companies today.

The bill also shrinks the Kansas Universal Fund, which is a pool of money collected from telephone customers in the state and that is used to support rural telephony.

The bill was originally authored by AT&T but was presented to the legislation with a united front by most of the carriers in the state. AT&T has lobbied for similar legislation in many other states. While Kansas is now the first state to effectively remove carrier-of-last-resort obligations, one would expect this to happen in other states. Telephone subscribers have been steadily dropping everywhere as consumers have shifted to cell phones and to VoIP carriers for their telephone usage.