Rethinking Outdated Voice Regulations

With old school switched access telephone service on a steep decrease, accounting for an ever smaller proportion of total voice connections, it may come as a surprise that the FCC continues to regulate incumbent telephone companies as “dominant” providers. While it is true that incumbents still account for most of the remaining switched access lines, that’s no longer a useful or relevant way of looking at the voice market. Customers have an abundance of options to choose from when they want to make a call—to the particular extent they are even making calls these days. It is time for the FCC to see market realities and eliminate the specifications associated with this supposedly “dominant” standing.

The waning relevance of switched access phone service within the voice market is well documented, including in the FCC’s own Local Telephone Competition Reports. Since the peak over a decade ago, the number of incumbent switched access lines has dropped by more than 50 percent, and incumbent switched access minutes of use have dropped by more than 70 %. In 2013, less than one-third of American households purchased an incumbent switched access service, and that shape is projected to drop to below 20 percent by the end of this season.

The reason is that consumers can choose from a wide array of competing services. The particular 2014 Local Telephone Competition Survey shows that between December 2010 and December 2013, interconnected VoIP subscribers increased at a compound annual development rate of 15 percent, and mobile telephony subscriptions increased in a compound annual growth rate of 3 percent, while retail switched access lines declined by 10 percent a year.

Indeed, that report marked the first time that the amount of residential VoIP connections exceeded the number of residential switched access lines. More than 80 percent of total VoIP connections are provided by non-ILECs (typically cable). That does not even count non-interconnected or “over-the-top” VoIP service, or the popular voice alternatives like text messaging and messaging.

Wi-fi penetration is another reason for the decrease in switched access service. Based on the latest CDC data, over 45 percent of American homes have cut the cord and no lengthier have a landline telephone at home. Additionally , more than one-half of all adults outdated 18-44 and of children under eighteen were living in wireless-only households. Even consumers that maintain landline service can easily have a cell phone or smartphone too given the high percentage of cellular phone and smartphone ownership. Moreover, the particular CDC reports that among households with both landline and wireless phones, over one-third received all or just about all calls on wireless telephones.

Given these technological and marketplace changes, it is time to rethink rules that single out one class of voice providers for more burdensome rules simply because they account for a larger share of the shrinking slice of the overall voice pie. That’s like regulating typewriters in the modern age of computer key boards, tablets and smartphones.

In 2012, the agency received a petition asking the Commission to undertake such a review, but it remains impending. In other words, it has been sitting in an hades for nearly three years, which is a problem in and of itself. Notably, the request did not seek complete deregulation, which I would argue is worth considering designed for both dominant and non-dominant service providers given the competitiveness of the bigger market as a whole. Rather, it simply requested that carriers currently susceptible to dominant carrier rules be controlled in the same manner as non-dominant carriers with respect to switched access service.

The petition noted three parts of disparate treatment: (i) dominant service providers are subject to price cap or even rate-of-return regulation, and must document tariffs with applicable cost support for services on a minimum observe of seven days or more, while non-dominant carriers are not subject to rate rules and may file tariffs on one day’s notice and without cost support; (ii) dominant carriers are subject to a 60-day waiting period for applications to discontinue, reduce, or impair services to be granted, as compared to a 30-day period for non-dominant service providers; and (iii) dominant carriers qualify for presumptive streamlined treatment designed for fewer types of transfers of manage under section 214 than non-dominant carriers.

When I browse the petition, I was struck by just how narrow the relief would be. This is hardly a major departure from their current burdens but such reasonable versatility may be helpful for providers. To explain, incumbents would still file charges and their services and dealings would remain subject to Commission oversight. Moreover, the petition is limited in order to switched access service and would not impact special access or VOTRE rules.

I fail to see how maintaining additional burdens which are not applicable to non-dominant company competitors, much less to wireless suppliers, VoIP providers, or edge suppliers, serves consumers. The costs of these extra burdens cannot possibly be justified simply by any supposed benefit. All they are doing is make a legacy service actually less attractive for providers to provide and for consumers to buy. It is not astonishing, therefore , that it is the voice providers and applications with little in order to no regulation where we are seeing the most innovation and the biggest development.

Part of the goal from the so-called “tech transitions” proceeding would be to identify and remove regulations that no longer serve a purpose so that suppliers can direct their investments on the new technologies and services that consumers are embracing. Reducing unnecessary rules on switched access telephone program would be a positive step in that path. After nearly three years, it’s time to dust off the filed petition and grant some relief.

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