DTV Deadline for POTS-Part 2

Posted by: Hank Hultquist on January 5, 2010 at 2:53 pm

As reported in my last blog, we recently filed comments in response to an FCC public notice on the transition from legacy networks and services to broadband. At the time, I had no idea how much interest this proceeding, and our filing, would generate. I came back from the holidays to find dozens of blog posts and articles reporting on, and in some cases “interpreting” our filing. While I understand that it might be fun to write about the phone company asking for permission to shut off telephone service, that wasn’t exactly the point of our filing.

Our filing was simply the latest in a series of filings (1, 2) that we’ve made over the last couple of years pointing out that the traditional POTS business model is in permanent and irreversible decline. AT&T is not alone in observing this trend. In fact, observers ranging from Stacey Higginbotham (Landlines are Obsolete in Less than a Generation) to the NYT (Continued decline of wireline number 3 top tech theme for 2010) have made the same point. Nor was AT&T the first to suggest a firm deadline for the transition.

Ordinarily this circumstance would be of little interest to regulators or policy wonks, but the POTS model is itself largely a creature of regulation. What I mean is that the business model of providing “basic local exchange service” (at a regulated price), plus “exchange access services” (at regulated prices), plus “long distance service” (at nationally averaged and integrated prices), plus (in some cases) explicit universal service subsidies, is at least as much the product of years of accumulated regulation as it is of supply and demand. The truth is that market forces alone would never have created this business model, and certainly would not have extended it to the low density areas that are the beneficiaries of the implicit and explicit subsidies inherent in the model.

Regulators and telephone companies cobbled the POTS model together as a way to achieve certain objectives, including universal service. And, I’m not saying that is a bad thing.  But realize, as consumers abandon POTS for other ways to communicate, the subsidies needed to maintain universal POTS availability will only increase.  This forces carriers to spread the cost of providing POTS over a smaller customer base, thus raising the average costs of serving those remaining POTS customers.  And, that is a bad thing. At the same time, policy makers are intent on transforming the universal service fund from a program that supports POTS to a program that supports broadband. We believe that as a country we all can continue to meet the goals of universal service in a broadband world, but not as quickly or as efficiently as possible if we don’t plan for the end of the POTS model.  And, that is the point of our filing.

Let’s be clear that this does not (and should not) mean that anyone will lose access to voice telephony. It simply means that in the future that capability will be provided over broadband IP networks, not over narrowband TDM networks. In our view, that future will be far less disruptive for all if we plan for the end of the POTS model than if we simply allow it to collapse.

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