Why Hybrids Have Seat Belts

By Joe Gillan

In late November, Hank Hultquist of AT&T posted a blog, oddly titled “Reinventing the Edsel," that he claimed responded to a filing by COMPTEL requesting that the FCC make clear that the competitive protections of the Telecommunications Act continue to apply to traffic exchange arrangements as the circuit-switched architecture of the PSTN is replaced by packet technology.

It is always easier to mock an opponent than to seriously engage on an issue. The AT&T blog makes clear that it intends to ignore its statutory obligations to engage in open, reciprocal and non-discriminatory IP-to-IP interconnection negotiations. What AT&T envisions is a world where it can dictate the terms of interconnection without regulatory oversight.

Contrary to what the AT&T blog portrayed, however, there is nothing antiquated about the interconnection and traffic exchange obligations of the federal Telecommunications Act. The Act correctly recognizes that the scale of a carrier like AT&T places other carriers at a disadvantage when negotiating the terms of interconnection and traffic exchange. Although the Act favors commercial negotiation, it also protects smaller networks from having to accept unreasonable terms by providing the backstop of arbitration.

AT&T inaccurately claims that COMPTEL was arguing that the same rules that apply to circuit-switched interconnection arrangements should apply to IP-to-IP interconnection. But that position is a boogey-man of AT&T’s creation. The COMPTEL filing did not call for the same detailed rules – there are differences between the technologies that should simplify IP interconnection – only that the same statutory framework should apply, both as a matter of law and competitive necessity.

The technology-neutral interconnection obligations of Sections 251 and 252 are intended to prevent AT&T from unilaterally dictating the terms of interconnection, whether or not service is provided using a circuit-switched or packet network. The Act’s core protections include:

• prohibitions on discrimination
• publicly filed interconnection agreements, subject to opt-in by other carriers
• arbitration when negotiations fail

And, importantly, the Act requires reciprocal compensation, so that AT&T (and others) cannot demand compensation while refusing to pay for the termination of its own traffic.

There were two specific concerns addressed in the AT&T blog. First, the blog pointed out that IP-to-IP interconnection should occur “at comparatively fewer points and at much higher capacities" than what occurs today. Although offered as rebuttal to COMPTEL, this is actually a point of agreement, and only goes to show that there may be (hopefully) some interconnection provisions that will not need to be arbitrated.

Second, AT&T claimed that COMPTEL was arguing for (what AT&T characterized) an antiquated form of compensation known as “calling party pays." Nothing in the COMPTEL filing remotely addressed this issue. But, because AT&T brought the subject up, it should be noted that the Act calls for reciprocal compensation for the transport and termination of traffic between networks. Because AT&T has not historically opposed the concept of “compensation," presumably the blog was foreshadowing an unwillingness to respect reciprocity. Time will tell if this prediction is true.

One final comment in defense of the oft-maligned Edsel. The Edsel is commonly viewed (by automotive experts) as ahead of its time, not obsolete (as suggested by AT&T). Similarly, the basic market protections of the Telecommunications Act are not grounded in any particular technology or architecture, but continue to apply as new technology is introduced to the network. This is no different than retaining basic safety protections (such as seat belts), even as new automotive technologies, like hybrids, are introduced.

As the FCC noted in its National Broadband Plan, its role is to adopt policies that accelerate the deployment of the new technology. Making clear that competitors will not have to sacrifice important competitive protections in order to request contemporary IP-to-IP interconnection arrangements will go far to further that goal.

Joseph Gillan is a consultant specializing in the economic evaluation of regulatory policies and related business opportunities in the telecommunications industry. He previously served on the staff of the Illinois Commerce Commission and was later at US Switch, ultimately becoming its vice president of Strategic Planning.