Last week, Sprint confirmed that, beginning January 1, 2013, it was imposing upon its Nextel, non-CDMA iDen subscribers a $10 monthly surcharge in order to incent those customers to move off of its legacy Nextel infrastructure and onto its CDMA Push-To-Talk infrastructure. The move to encourage those subscribers to move to new technology is absolutely logical. Back in 2007, the wireless industry was faced with the task of retiring the industry’s analog network infrastructure. To accomplish that, carriers created similar charges to incent subscribers to abandon the legacy technology and move to digital phones that worked (then) on the 2G network. After a 5 year period of transition, despite the fact that there were still several hundred thousand subscribers who had not yet migrated to the new technology, the carriers were permitted to turn off the analog networks. When that happened, the world did not end. Customers who had not yet swapped out their equipment had to come to a phone store and exchange their obsolete equipment for new devices. We saw an orderly transition whereby the infrastructure providers were permitted to retire legacy infrastructure and migrate their customer bases to digital networks.
In today’s world, where technology innovations are occurring at lightning speeds, infrastructure providers must have that path to retire older, more expensive legacy infrastructure in order to create an economic path to new technologies. Sprint’s move to incent that transition is necessary because ostensibly it cannot economically continue to operate its legacy infrastructure with a dwindling subscriber-base on that legacy technology. I don’t think you could find a sound engineer or economist who would disagree with what Sprint is trying to accomplish. From a public policy perspective it seems simple: if policymakers want to provide incentives for new technology investment, they have to provide infrastructure owners with a path to retire the legacy, more costly, less efficient technologies. If you don’t, the cost of serving those “last adopters” will not only linger, but over time will grow exponentially, thereby discouraging investment in the new technology at the start.
When we filed our IP Transition position at the FCC, we were making the same case for the wireline infrastructure. The difference, of course, between what Sprint is actually doing on the wireless and what we are proposing to do on the wireline side is that the wireline incumbent telco industry cannot self-effectuate this transition as Sprint has proposed to do. That is because incumbent local exchange carriers are governed by rules created decades ago which require those companies to go through a byzantine maze of proceedings prior to engaging the plan that Sprint has unilaterally put in motion. We are trying to simplify that process by asking the FCC to open a special proceeding to expedite the wireline transition. My guess is that regulatory process will still be agonizingly slow and Sprint’s transition will be long complete before we get a similar blessing on the wireline side. But that just means we have to begin this discussion now.
As a side note, Sprint’s iDen announcement also reinforces the fact that policymakers must be wary of competitive providers using these legacy, regulatory processes to advance their own interests rather than the public interest. Case in point. In the wireless world, Sprint fully recognizes the need to use tools like pricing to incent subscribers away from legacy, inefficient technologies. Back in the wireline world, however, Sprint sings a different tune. There, in the special access fights, Sprint argues that the Commission should drastically reduce the price of legacy, TDM copper-based 1.5 Mbps services in order to incent investment in new technologies. Now if Sprint really believed that, of course, it would seem Sprint should be lowering the price of their iDen services rather than imposing a $10/month surcharge. So policymakers need to be careful not to prolong these regulatory proceedings by confusing the public interest with a competitor’s private interests.