The FCC took action on October 28 to address a growing problem of calls that are not completed to rural areas. The Commission adopted new rules that are aimed to remedy a growing problem of calls that are not completed.
The FCC noted that the situation was “serious and unacceptable” and that every call that is placed should be terminated. The FCC note that “Whatever the reason, the consequences of failed calls can be life-threatening, costly, and frustrating. Rural businesses have reported losing customers who couldn’t call in orders, while families attempting to contact elderly relatives have worried when they hear a ring – but no one picks up on the other end because the call never actually went through.”
The FCC surmises several reasons for uncompleted calls:
They think that some providers are not routing to rural areas to avoid higher than average terminating access charge rates. The access rates in rural areas are still much higher than rates for major metropolitan areas, which reflects the higher cost of doing business in rural areas. Terminating rates can still be as much as two cents per minutes higher. However, the FCC has always said that it insists that every call must go through, and if they ever got evidence of a specific carrier boycotting an area due to high rates I suspect they would levy high fines.
They think that much of the problem is due to the fact that calls can be routed through multiple carriers. They note that the best industry practice is to limit to two the number of intermediate carriers involved in routing a call. I know there are a lot of new carriers in the market today, such as multiple new companies marketing voice services like IP Centrex who search for the lowest cost way to route calls. One has to suspect that the long distance carriers beneath some of these carriers have gotten very creative in terms of routing calls to save costs.
Some carriers have been sending a ring tone to the calling party before the call has actually been completed. One has to suspect that this is done so that the caller can’t hear all of the intermediate switching going on to get the call completed. The problem with doing this is that the caller will hang up after a few unanswered rings, often before the call has even been completed.
The FCC took several concrete steps to fix the problem. These new rules will be effective in a few weeks once the final rules are published. The new rules are:
False audible ringing is prohibited, meaning that a telephone provider cannot send a ringtone to the caller until the call has actually been answered.
Carriers with over 100,000 voice lines, and who are the carrier that determines how calls are routed must collect and retain calling data for a six month period.
Carriers who can certify that they follow best industry practices, such as not routing calls through more than two intermediate carriers, will be able to get a waiver for some or all of the storage and reporting requirements.
Carriers who can demonstrate that they have all of the mechanisms in place to complete rural calls can also ask for a waiver from the storage and reporting requirements.
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”.
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.
Last week in GN Docket 13-5 the FCC issued an update that asked additional questions about its planned transition of the historic TDM telephone network to all-IP network. This docket asked for comments on several topics like having a trial for transitioning the TDM telephone network to all-IP, for having a trial to go to enhanced 911 and for making sure that a switch to IP would not adversely affect the nationwide telephone databases.
But the docket also asks for comments on whether the FCC should grant telephone companies the right to substitute wireless phones for wireline phones and abandon their copper network. The docket mentioned two companies that wanted to do this. For example, Verizon said they intend to put wireless on Fire Island off New York City as they rebuild it from the devastation of hurricane Sandy. But AT&T has told the FCC that they are going to request permission to replace “millions of current wireline customers, mostly in rural areas, with a wireless-only product”.
Let me explain what this means. There are now traditional-looking telephone sets that include a cellular receiver. To replace a wireline phone, the telephone company would cut the copper wires, and in place of your existing phones they would put one of these cellular handsets. They would not be making every family member get a cell phone and there would still be a telephone in the house that works on the cellular network.
This make good sense to me for Fire Island. It is mostly a summer resort and there are not many residents there in the winter. It’s a relatively small place and with one or two cell phone towers the whole island could have very good coverage. And if the cell phone tower is upgraded to 4G there would be pretty decent Internet speeds available, certainly much faster than DSL. One would have to also believe that the vast majority of visitors to the island bring along a cell phone when they visit and that there is not a giant demand for fixed phones any longer.
It is AT&T’s intentions, though, that bother me a lot. AT&T wants to go into the rural areas it serves and cut the copper and instead put in these same cellular-based phones. This is an entirely different situation than Fire Island.
Anybody who has spent time in rural areas like I do knows the frustration of walking around trying to find one bar of cellular service to make or receive a call. Cell phone coverage is so good today in urban areas that one forgets that this is not true in many places. I have a client, a consortium of towns and the rural areas of Sibley and Renville Counties in Minnesota. Let me talk about my experience in working with them as an example of why this is a bad idea.
My primary contact works in the small town of Winthrop. I have AT&T cellular service and when I visit him my cellphone basically will not work. I sometimes can move around and find one bar and get a call through, but I can’t coax the phone to get a data connection so that I can check email. And if you go west from Winthrop the coverage gets even worse. AT&T’s coverage maps show that they serve this area, but they really don’t. There are places in the east end of Sibley County that have decent coverage. But there are also plenty of farms where you can get coverage outdoors, but you can’t get coverage in the house.
The traditional cellular network was not built to serve people, but rather cars. Cell phone coverage is so ubiquitous now that we already forget that cellular minutes used to be very expensive, particularly when you roamed away from your home area. The cell phone network was mostly built along roads to take advantage of that roaming revenue stream. If you happen to live near to a tower you have pretty decent coverage. But you only need to go a few miles off the main highway to find zero bars.
And I use the Renville / Sibley County client as an example for a second reason. The people there want fiber – badly. They have been working on a plan for several years to get fiber to everybody in the area. The area is a typical farming community with small hub towns surrounded by farms. The towns have older cable systems and DSL and get broadband, although much slower than is available in the Twin Cities an hour to the east. But you don’t have to go very far outside of a town to get to where there is no broadband. Many people have tried satellite and found it too expensive and too slow. There are any homes still using dial-up, and this is not nearly as good as the dial-up most of you probably remember. This is dial-up delivered to farms on old long copper pairs. And it is to get access to an Internet that has migrated to video and heavy graphics. Dial-up is practically useless for anything other than reading email, as long as you don’t send or receive attachments.
Over 60% of the people in the rural areas in Renville and Sibley Counties have signed pledge cards to say that they would take service if fiber can be built to them. One would expect this would translate to at least a 70% penetration if fiber is built. They refer to the project locally as fiber-to-the farm. There has been a cooperative formed to look at ways to get fiber financed. And any financing is going to require local equity, meaning the people in the County are going to have to invest millions of their own dollars in the project – and they are certain they can raise that money. That is how much they want the fiber. And this same thing is true in rural areas all over the country. Most of rural America has been left behind and does not have the same access to the Internet that the rest of us take for granted.
AT&T’s idea is only going to work if they make a big investment in new rural cell towers. The current cell phone network in rural areas is not designed to do what they are proposing, even for delivering voice. And even if the existing rural cell phone towers are upgraded to 3G or 4G data (which almost none have been), most people live too far from the existing towers to get any practical use from cellular data. Cellular data speeds are a function of how close one is to the tower and, just like with DSL, the speeds drop off quickly as you get away from the hub.
I hope rural America notices this action at the FCC and files comments. Because as crappy as the rural copper wires are today, when the wireline network disappears many rural households are going to find themselves without telephone service. And forget about fast rural data. The AT&T plan is really just a plan for them to abandon and stop investing in rural communities.
SIP stands for Session Initiation Protocol and is a technology at the enterprise level for delivering multiple voice connections to a PBX or key system over an IP data connection. In order for a business to utilize SIP they must have a PBX with a SIP-enabled trunk side and their data provider must be able to deploy and switch SIP.
SIP Trunks at the enterprise level of the network replace PRIs between the central office and PBXs. A PRI is a dedicated T-1 transport circuit and can support 23 bearer paths for voice, but a SIP trunk connection typically rides an existing data circuit and can be used to carve out as many voice paths as are wanted within the limits of the bandwidth available.
Following are the reasons that businesses want SIP trunks, and thus for carriers to sell them. This list is discusses the advantages for the small and medium business customer.
Saves Money. SIP generally saves money. SIP trunks replace PRIs which are inefficient. It is not unusual for a customer with a PRI to be using only part of the capacity and yet they have to pay for it all since it is a linear product. SIP trunks are typically carved out of a company’s data or Internet connection and can be sized as needed within the constraints of the bandwidth. It is typical for a business to cut their costs at least in half using SIP trunks compared to PRIs due to the efficiency.
More Efficient Use of the Data Connection. Most businesses will already have an Internet connection and SIP trunks are carved from those connections. Most businesses use their data connections in a bursty fashion, meaning there are times of the day when they use a lot of their bandwidth, but also many times when they use very little. SIP trunking can take advantage of the unused capacity in most company data connections. Companies often do not need to increase the bandwidth they are buy SIP trunks and can fit them into their existing data product.
Enables Unified Communication. SIP enables all of the various features that comprise unified communications such as access to the phone system from cell phones or tablets, integrated voicemail and email, video chat, instant messaging and other features that make businesses more productive.
Enables Upgrade to an IP PBX. Businesses more and more want the kinds of features that are available with an IP PBX and IP handsets. Many businesses are choosing to buy an IP PBX to get these features rather than buy IP Centrex from their telco provider. The general advantage for a business to have their own IP PBX is the ability to customize their communications network, something that many service providers do not offer with IP Centrex.
Allows Multiple Locations to Act like One. With SIP trunks and an IP PBX a business with more than one location can have a unified telephone system that brings the data and voice together for all locations.
Any carrier that sells enterprise data service to businesses should offer SIP trunks. Even if you sell IP Centrex, customers who prefer to have their own phone system are going to want SIP trunks.
In a few other blogs I have referred to IP Centrex as a new service for businesses, so I thought I ought to explain the service. Hosted IP Centrex service uses data-centric phone sets to replaces key system, PBX system or existing Centrex service. The IP Centrex phones can be controlled by a softswitch or by connecting an IP PBX to a legacy switch.
A number of CCG’s clients are having success selling IP Centrex to business customers. The product includes the best features of a large PBX plus many additional “value added” services that are only available through IP based phone service. The product can be integrated with a subscriber’s computer systems to provide such features as dialing from Outlook, common databases for all employees, etc.
There is a wide range of phone sets available that include a screen that allows a caller to manage their calling. The product requires a customer to buy new IP handsets and many of my clients lease sets as part of the price.
This product has a large potential market since it can be tailored for the very small or very large business. It is easy for the carrier or the subscriber to customize features for each phone or for the whole system.
There are a number of benefits of this product to both the carrier and to subscribers. Some of the biggest advantages:
Benefits to the Carrier
Can be sold to any business subscriber regardless of what service they had before. It’s a good replacement for B1’s, trunks or traditional Centrex.
Subscribers become stickier to the extent you can get them hooked on custom features not available elsewhere.
Allows a carrier to sell service outside your traditional footprint. You just need to find businesses that have a decent high-speed data connection. This also means you can sell voice services to all branches of a customer’s business and not just to those in your footprint.
It promotes the Company’s data products and is easily bundled with data.
The product has a lot of pricing flexibility and can be sold to compete with multiple B1’s or traditional Centrex. You should be able to profitably beat the price of any traditional phone product.
Benefits to Business Subscribers
The Subscribers get a telephone system that equals the features of a high-end PBX.
The Subscriber no longer needs to buy or maintain a PBX. The customer can buy the IP phones or lease them from you.
Subscribers can portray a unified professional image to the public. Employees at remote locations can be integrated into the telephone system. And small companies can act like bigger companies by the use of the various features. Remote employees can be made to feel like a part of the Company.
Subscribers can tailor the phone system and each phone to meet their needs. There are hundreds of features available including many that were not available on analog systems.
Subscribers can easily manage the features available on each set using the Subscriber portal that allows for easy and immediate changes to the features on any or all phones.
Phones are portable and an employee can quickly move their phone from desk to desk or office to office and keep the same extension, voice mail and features.
Phones can be programmed to be nomadic (portable, but not mobile). This means that an employee can take the phone out of the office and work at home or in a hotel as if they were in the office. All features and functions of the phone remain unchanged.
Small telcos and most CLECs are waiting to see what will come from the changes due to converting to an all IP network for telephony. Today the telephony voice network utilizes TDM (time division multiplexing) technology that was originally developed for copper but that has been upgraded to use fiber. But the FCC has said that this old network is going to have to be upgraded to all-IP, meaning that voice will be carried by Ethernet similar to the way that data is transmitted.
I don’t think anybody is arguing that this kind of shift makes sense. IP trunking is far more efficient in terms of carrying more calls in the same amount of bandwidth. And a lot of companies have already implemented some IP trunking.
The important issue for small telcos and CLECs is how this transition is going to change their costs. In order to understand the possible change, let’s look at how voice traffic gets to and from small telcos and CLECs today.
Independent telephone companies connect with larger companies and neighboring companies by physical interconnection at mutual meetpoints. Historically, most of the meetpoints are located at the physical border between two neighboring telephone companies with each company owning the fiber and electronics in their own territory. And each telco is responsible for the costs of their portion of the network. Historically local calls have been exchanged for free in both directions and there are access charges in place for all telcos to get paid by the long distance carriers for using their network and facilities for long distance calls.
The rules governing CLECs were established by the Telecommunications Act of 1996. This Act laid forth the basic rule that a CLEC can interconnect with a telco network at any technically feasible point. This idea was fought hard by the large telcos who wanted CLECs to bring traffic to their tandems (regional hub offices). Once a CLEC has established a meetpoint, then it works pretty much the same as normal telco interconnection in that both parties are responsible for costs on their side of the interconnection. Sometimes local calls are interchanged for a fee and sometimes they are free (called bill and keep) and this is negotiated. The CLECs also bill access charges for carrying long distance calls.
There are a number of ways that IP trunking could be implemented, and each of them has financial consequences for small telcos and CLECs:
The IP network could be built to mimic the current PSTN. The routes would be roughly the same but the rules of interconnection would stay the same. But with IP trunking the network would be more efficient.
The large telcos could establish regional hubs and expect everybody else to somehow get their traffic to those locations. This would be a radical change for small telcos who would have to build or lease fiber from their rural location to the nearest regional hub. For CLECs this would completely undo the rules established by the Telecommunications Act of 1996 and would put all of the cost to get to the hubs onto them.
In the most extreme IP network there would be only a few large hubs to cover the whole US. This would be the most efficient in terms of the hubs, but it would require all telcos and CLECs to spend a lot of money to get their voice traffic to and from the hub.
Since I have been working in the industry the RBOCs (now AT&T and Verizon) have tried several times to put the burden and the cost of transporting calls onto the small telcos. But regulators have always stepped in to stop this because they realize that it would greatly jack up the cost of doing business in rural areas. I certainly hope that as we move to a more efficient network that we don’t end up breaking a system that is working well.
The downside to any plan that shifts cost to small telcos is that the cost of providing local and long distance service will increase in rural areas. The consequence of changing the CLEC rules will be less competition. The current interconnection and compensation rules have served the country well. Every caller benefits by having affordable rates to call to and from rural areas. And there is no doubt that higher communications cost would be a major hindrance to creating and keeping jobs in rural areas.
A significant percentage of CCG’s clients sell telecommunications services to businesses. When I ask them what they think businesses are now looking for from a telecommunications provider, I most often get the responses listed below.
Interestingly, saving money is not on this list. While most of my clients sell at competitive prices, they say that business customers value a reliable network much more than they do a lower price. Since phones and computers are often now tied together using IP, a network outage effectively can completely cripple a business if they lose both phone and the Internet.
Single service provider. Ideally, most small to medium businesses would like one service provider to take care of everything from data, phones, IT, computers, etc.
Reliable network. They want to be served by a reliable network, with reliability measured in terms of outages. This is often why a new network owner in a town will see slow sales to businesses for a few years until the local market perceives that their network as reliable.
Faster data speeds. While faster download speeds are always important, many businesses also covet fast upload speeds.
Employee mobility. Businesses want the ability for employees to be able to work from home or on the road.
Off-site data storage. Businesses want key data stored offsite to avoid catastrophic data losses. They feel safer if they know the company who is storing their data.
Fast provisioning and changes in services. Businesses want to be able to change things on the fly, be that moving an employee to a different office, changing the features on a given phone or computer, or increasing data speeds.
Physical security and surveillance. Businesses want next generation security systems with features like biometric access, motion detectors and hidden surveillance cameras.
Redundant connections. More and more businesses want physically redundant data connections since their businesses are more reliant on the Internet to be profitable.
Moving to the cloud. Lately businesses have been asking about cloud services since they hear it is a way to eliminate or reduce their IT functions and let outside parties take care of updates, security, etc.
Unified communications. Businesses want phone calls and data to get to them over multiple devices across multiple networks.