Jim Cicconi: The IP Platform: Consumers Are Making The Transition…Can Regulators Do the Same?

Posted by: AT&T Blog Team on June 15, 2012 at 12:39 pm

At the Communication Exchange Committee today in Washington, DC, AT&T’s Jim Cicconi spoke about the importance of transitioning to an all-IP network.  Following are his remarks as prepared for delivery.

I think we are in a unique position here today – a position of consensus, or at least near-consensus. I believe the timing of this session, and its theme, are important because increasingly three things are becoming obvious to us.

That the communications market is very quickly evolving to a broadband, IP market where the traditional services simply become applications riding on an IP infrastructure… and where consumers not only have thousands, of different ways to interact with each other digitally, but they are in control of what they use and how they use it.

That this move to IP is a very good thing, and that it’s in the public interest it move even faster.

And that the traditional regulatory approach – whereby individual services were each regulated by their own set of rules inside of a regulatory silo – has been totally overtaken, and made virtually nonsensical, by this new IP world.

So we are all here today to discuss how are we going to make this great leap from POTS to Internet, from TDM to IP, from a voice network to a broadband network where voice is just one of many communications applications riding on that infrastructure.

So while it may seem obvious, we have to get the policies right, we have to create the right incentives to get the infrastructure built and we have to preserve a marketplace where consumers are in control of how, when and the means by which they communicate with one another.  And I’d submit that policymakers have got to move faster lest the old laws, regulations and mindsets that are still in place warp or even damage this vital transformation.
 

 

Consumer Demand, Market Facts and Regulatory Modernization

Let me throw out a few facts to demonstrate the type of change I am talking about.  Did you know that:

  • Every month, 700,000 consumers cancel their traditional landline services in favor of wireless or IP service?
  • That one out of three households is now wireless only?
  • That the number of wireless-only households has doubled since 2008 and is projected to cross to over 50% by 2015?
  • That IP traffic from wireless devices will exceed traffic from wired devices by 2016?
  • That consumer demand for increasing amounts of bandwidth has led all national and many regional wireless providers, the tip of the “IP transition spear,” to upgrade their networks to 4G LTE and transition their backhaul circuits to a fiber-based IP infrastructure?
  • That over the past five years, AT&T’s wireless data traffic has grown 20,000%?
  • That in response to that demand, AT&T has invested over $95B in its network in the past five years.
  • That after years of talk about the digital divide, inexpensive smartphones in the hands of minorities and lower income people have finally begun to bridge that divide so that everyone – irrespective of color or income – can have access to the Internet?
  • That the days of businesses operating in neat silos are over?

Despite the neat silos anticipated by the ’96 Act, Google now offers voice services, we at AT&T now offer TV service, Microsoft does entertainment…satellite companies are even talking about wireless services.  All this change is being driven not by us, but by consumers.  And we are all in the business of keeping up with consumer demand.

These facts show that most consumers are already well along in making their own personal transition.  But does anyone here think policymakers are making that transition as swiftly?

So, what should policymakers do?  Two things…

First, we have to modernize our regulatory structure in this country to ensure that the communications industry is able to evolve to its full potential.  We have to avoid the temptation to drag our siloed, centuries-old regulatory approach into the IP world.

Innovation is flourishing in the communications marketplace today.  We continue to be the worldwide leader in mobile Internet and we have more competitive broadband choices — mobile or fixed — than virtually any place on earth.

But changes are going to be necessary to keep and expand the choices that are in the marketplace today.

Policymakers have to embrace the transition by all infrastructure providers to an all-IP world.  That is going to make some regulators – state and federal — uncomfortable.   Because their regulatory hold is on services – Title 2 services — and a move to an all-IP world is going to fundamentally change the way we think about regulation in this country.  But it makes no sense to treat the Internet and IP services as if they’re one gigantic telephone.

The economics of wireline infrastructure and investment tell us that we must evolve to the most efficient technologies if these companies are to invest, survive and thrive.  There are fewer people today connected to the POTS infrastructure than are not connected to that infrastructure.  1/3 of Americans are now wireless only, another 1/3 are VOIP customers.  The economics of a monopoly voice world will not work in this environment.  And that is not just because of technology.  It is because the monopoly voice world for which our laws and regulations were designed no longer exists.

Regulations that impede this transition and direct resources and capital to the last century’s infrastructure are counterproductive and ultimately harmful to consumers. There are not enough resources to build out new, modern IP networks and still maintain the old one – with fewer and fewer people connecting to it — at the same time.

The FCC deserves credit for reforming universal service in a way that recognizes the importance of broadband and this transition, but much more is needed.

Policymakers must realize that the key to ensuring the open and dynamic Internet we all want is making sure there’s a clear path with incentives to invest in new technology and network platforms.  Regulatory overhang and uncertainty is a recipe to block that pathway to investment.  We need clear direction from policymakers that we are going to allow these new Internet and IP markets to work and only intervene where there is a clear market failure, or when consumers have been abused.  I have talked for a long time about getting that type of clear direction from Congress and I believe it is essential not only for regulators to hear that clear message but also for investors to hear that signal as well.

Second, we have to realize that actions we take in the United States affect broadband policies worldwide.

Countries like China and Russia, among others, are today advancing the proposition that governments should have control over the Internet.  This is an important issue with enormous and frightening implications, and it has rightly united all of us here in the United States to work in opposition.

But we have to understand that many of these countries are pointing to US actions to exercise control over the Internet as justification for their own initiatives:

The FCC stepped in to require data roaming, which is really the ability to access the Internet wirelessly, under theories that look and feel like Title 2 theories.

We had a bruising battle here over the regulatory concept called net neutrality, and even though those issues have been resolved, we still have open proceedings that threaten to put Title 2 regulations on the Internet.

We even have proceedings open at the FCC asking whether we should regulate IP-to-IP interconnection under Title 2, which goes to the heart of how the Internet is structured and functions.

There is a principle at stake here.  Either government regulates the Internet or it doesn’t.  And the U.S. can’t have it both ways.  We cannot oppose the concept of Russia or China imposing government regulatory control over the Internet, while somehow maintaining that regulation by our own government would be different.  Either we believe in the principle or we don’t.  And we risk losing the larger global fight if we cannot find a way to follow our own principles here at home.

Conclusion

As we transition to an all-IP world, we must bear in mind that it is the consumer who is in the driver’s seat.  And for them the value is in the connection, not which different technology provides it.  This is the same lens through which policy should be crafted.

Regulators must encourage and facilitate, not hinder and block, the transition to an all-IP infrastructure.  Today, we should be implementing a policy of retiring TDM services and getting all businesses and carriers to start deploying fiber-based IP services.

Modernizing regulation will remove uncertainties and roadblocks.  It will allow consumer demand to keep driving innovation while also protecting potentially vulnerable populations like seniors and rural residents, and enabling all consumers to move forward as part of the technology transformation.  Policy makers must also be reminded that other parts of the world watch what happens in Washington.  Actions in the US could have ramifications elsewhere e.g. ITU WCIT.  We cannot succeed with a “do as I say, not as I do” mentality.

We need a clear policy directive from Congress that regulation will be aimed not at protecting Company A against Company B, but instead focused on protecting consumers from abuse by any company – and trust the highly competitive Internet economy to function.  I hope that all of us who are stakeholders will embrace this Grand Challenge.  But I also hope our governmental leaders will take up the challenge as well.  And recognize—and implement—the fundamental changes in law, in regulation, and in mindset, that our Nation will need if we are to stay the global leader in Internet infrastructure and services.

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