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Regulation of the Internet:The How’s and Why’s of

Telecommunications Reform

John WindhausenPresident, Telepoly Consulting

Wendy WigenPolicy Analyst, EDUCAUSE

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What is Driving the Effort to Re-Write the Telecom Act?

What is being proposed?

What does the higher education community support?

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What is Driving the Effort to Re-Write the Telecom Act?

1. Telephone Companies Seek Broadband Deregulation (Parity with Cable)2. Small Telcos concerned that VOIP will erode universal service revenue.3. Bell Companies Seek to Preempt Cities from Regulating Internet Video

What do all three issues have in common? They are all fueled by

growth of the Internet.

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Chapter 1: Background

Purpose of the Communications Act of 1934:

…to make available… to all the people of the United States… a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges.

Authority:Gave very broad authority to the FCC.

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Structure of the 1934 Communications Act

General FCC Authority

Spectrum Licensing

BROADCAST TV AND RADIO

Title ILAW Title II Title III

Common Carrier

VOICE PHONE CALLS

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Results under the Communications Act of 1934Bell Companies (AT&T) build telephone networks serving 80% of the U.S. population.The Rural Utility Service provides grants and loans to small “mom and pop” phone companies to cover the remaining 20% of the population, resulting in 1400 independent telephone companies.U.S. Telephone penetration at 94%, one of the best in the world.

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1980’s: New Services Bring Stress to the 1934 Act Structure

Data Communications over Telephone Company Facilities FCC’s Computer I, II and III Decisions create a basket of Unregulated “Information Services.”Cellular service developed slowly. The FCC initially awards only two licenses per market.Cable TV systems deployed gradually, as cities demand parks, production studios, money in paper bags, etc.

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Congressional Action Spurs Deployment of Cable and Wireless Technologies.

1984 Cable Act preempted local authority over rate regulation, established federal rules (and FCC authority) over cable prices and programming. 1992 Spectrum Auction Act made new spectrum available for 3-5 PCS licenses to compete with cellular.

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Mid-1990’s Communications Policy

Common Carrier

VOICE PHONE CALLS

And laterDATA

WIREDAnd later

WIRELESS

Spectrum Licensing

BROADCAST TV AND RADIO

And laterWIRELESS VOICE

(Private radio,Cellular, PCS)

SATELLITE

CABLE TELEVISION

Title II Title III Title VI

Unregulated: Enhanced ServicesData processing, AOL, ISPs

REGULATED

General FCC

Authority

Title I

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Telecom Act of 1996

Imposed Unbundling Obligations on the Bell Companies in return for allowing them into long distance.Opens the local phone market to competition.Requires the FCC to promote advanced services. (section 706)Banned Internet Porn.

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Results of the 1996 Act:

Local telecom competition has stalled at about 15% of the market. Over investment in low-speed broadband facilities. Low-speed broadband now available to over 90% of US Homes.But only 30% subscribe, putting US 16th among Developed Countries.Cable and Telcos now compete for Broadband service, but operate under different rules.

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Chapter 2: And Along Comes the Internet….

We could have killed it but we wisely chose not to…. FCC 1999

We haven’t regulated it because we didn’t know how to… Senator Cantwell 2004

First, do no harm… Michael Powell, former Chairman of the FCC

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Internet Regulation

Telecommunications Service:

Provides basic transmission service to the general public for a fee

Highly regulated

• Behavior (anti-trust, consumer protection…)

• Revenue (USF, 911…)

Information/ Enhanced Service

(including Internet Services):

Provides enhanced communication service that involves data storage/processing i.e. Internet access, voice mail….Data is manipulated or acted uponUnregulated

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But what if…Broadband transmission is bundled with IP Service,

Voice over IP competes with Traditional Voice,

and Video over IP compete with cable???

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3 Questions:

Should DSL and cable modem transmission services be regulated as telecom or info services if they are used solely to provide access to broadband info services? Should VOIP be regulated as a telecom service or info service?Should Video over IP be regulated as a telecom service or a cable service?

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Answer #1: Information Services.

Common Carrier

High-Speed Network Facilities

Dial-up

CABLE TELEVISION

Title IIComm. Act Title VI

Unregulated: Information Services

REGULATED

S. C

ourt

Cable Modems

FCC

DSL and Other Telco Broadband

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Answer #2: VOIP is ?

“VoIP breaks the mold.  It is voice as a data service.  Considered another way, the 1996 (Telecommunications) Act assumes that data applications operate on top of a regulated voice network.  VoIP, by contrast, delivers voice on top of an Internet protocol data channel, which can run on any type of digital network.”

….Kevin Werbach

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What if a lot of people switch to VoIP?

What happens to:1. Law Enforcement Access (CALEA)2. Emergency 911 Service (Public Safety)3. Access for the disabled (Disabilities

Act)4. Support for the Universal Service Fund 5. State revenue…. 15%

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Answer #3: Telecom Services?

Common Carrier

High-Speed Network Facilities

Dial-up

CABLE TELEVISION

Title IIComm. Act Title VI

Unregulated: Information Services

REGULATED

Con

gres

s?

VOIP

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Answer #3: ?What if a lot of people switch to

Video over IP?

What happens to public service requirements?

What about franchising rules: $$$ and control .

If the Bell Companies receive a national franchise to provide video, why should the cable companies continue to subject to municipal control?

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Answer #3: Info Services?

Common Carrier

High-Speed Network Facilities

Dial-up

CABLE TELEVISION

Title IIComm. Act Title VI

Unregulated: Information Services

REGULATED

Congress

Video Over IP

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Convergence and Competition

1. Deregulate and let the market sort it out…. Use anti-trust law to deal with unfair competition. (mature industry i.e. railroads, airlines)

2. Status quo: The law is sufficient as is, it just needs to be enforced and clarified.

3. Issue-by-Issue: Separate bills on each topic.

4. Write a new law based on how IP systems work.

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Chapter 3: What is the higher education

community doing?

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Higher Education View of The Internet

The Internet should remain an open and innovative network.Broadband connectivity is available and affordable to as many persons in this country who want it.Broadband offers speeds that allow, not just advanced entertainment, but advanced:

EducationMedical servicesGovernment Services

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The United States not only continues to compete but to lead in information

technology.

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Higher Education’s Perspective

The United States should adopt as a national goal:

A fast, affordable, ubiquitous broadband InternetAn Internet that is open to all persons, lawful content and applicationsA policy that promotes fair and open competitionA policy that guarantees the right of communities to build and operate their own networksA policy that supports and funds continued academic research into Internet technologies and applications

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More Information

EDUCAUSE Policy Websitehttp://www.educause.edu/policy

wwigen@educause.edu