Regulation of Broadband

1
Regulation of Broadband

• Part 2

2
Trends in Convergence

• Bundling of services Goals are to lock in
  customer base for life and provide one-stop
  shopping, maximizing revenue and achieving
  economy of scale.
• Proliferation of mergers between same and
  complementary industries (local and long
  distance, cable and other media, and cross
  ownership) and joint ventures to link different
  industries such as telephony and programming.
• Build-outs and expansion complete and/or scaled
  back due to slow-down in economy

3
What is Broadband?

• All evolving high-speed digital technologies
  that provide consumers integrated access to
  voice, high-speed data, video-on-demand, and
  interactive delivery services.

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Fully evolved, it will

• Eliminate geographic impediments to access to
  information and
• Reduce time to access information.

5
Players and Positions

• LECs?IX ?Broadband
• Local Governments, CLECs, Resellers IX?LECs
• Cable?telephony ?Internet ?Broadband
• CAPs ?ISPs ?Internet ?Broadband
• FCC? open market vs. regulation
• Consumer Groups? lower prices, better services
• State? preempt local authority, pro LECs

6
Services Include

• Digital subscriber line (DSL)
• Cable modem
• Wireless internet
• Satellite

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VoIP Telephony Over the Internet

• Step 1 Pick up your phone and dial the number,
  using an adaptor that connects to your existing
  high-speed Internet connection.
• Step 2 The call goes through your local
  telephone company to a VoIP provider.
• Step 3The phone call goes over the Internet to
  the called party's local telephone company for
  the completion of the call.

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How Broadband Works

• Telecos use copper for telephony and provide
  broadband via DSL-circuit switched. Circuit
  switches are sent via low frequency while data
  are sent over the same line at a higher frequency
  via DSL modem. Uses splitters to segregate the
  signal and multiplexers to route.
• Cable via cable modem allows companies to use
  coaxial cable and from a hub connected to a
  single trunk gain access to homes. Can send
  two-way internet connections along single trunk
  without interference at a slightly faster rate
  than DSL.

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Goal

• Make broadband universal and affordable by 2010.

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Challenges

• Infrastructure is not ubiquitous,
• High costs of deployment
• Limited access in underserved areas and
• Limited Consumer/business demand.

11
Discussion Questions

• What are the historical problems with telephone
  service?
• Who is causing the problem?
• In what areas has there been competition?
• What is the most valuable access in telephony?
• What is the current problem?
• What areas are the focus of providers?
• CAPs have doubled their market share vs LECs
  though LECs still dominate. Does that show
  success in competition?

12
Current Regulation for Telecos

• Basic services AKA telecommunication
  services per 1996 Act- e.g. circuit-switch ?
  regulated under Title II.
• Enhanced services AKA information services
  per 1996 Act e.g. Internet? unregulated under
  Title I ancillary jurisdiction.

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Title II

• Just and reasonable service, without
  unreasonable discrimination or undue preference.
  
• This means a) cost-based rates, b) no special
  prices to favored customers, and c) no control
  over non harmful devices that can connect to
  system.

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Information Services

• Offering of a capability for generating,
  acquiring, storing, processing, retrieving,
  utilizing, or making available information via
  telecommunications.
• 47 U.S.C. 153

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Current Regulation for Cable

• Cable modem service is an information
  service, not a telecommunication service under
  1996 Act.
• Operate via local municipal franchise monopolies
  and not subject to Title II.
• Not required to provide access to ISPs for
  Internet access, and are not subject to
  unbundling rules, line sharing or splitting
  arrangements.
•  

16
Action Reaction

• Telecom Act seeks to increase competition in LEC
  and IX
• FCC rules LEC must show competition and provide
  access at discounted rates
• States impose 15-17 discount
• Ct. App says LEC not required to lease broadband
  and ISP at discount

• IX get into LEC LEC get into IX outside area
• Local gov. get into LEC
• Prices in IX go down
• LECs acquire IX, cellphone kill IX
• LECs lose market share
• Ct. App. strikes down rules as improper
  delegation of authority to states re which parts
  to lease
• LECs can charge more for leased lines to IX
• Consumer internet prices go up

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Action and Reaction

• SCt. says states can block cities and towns from
  LECs
• Ct App. rule FCC cannot reclassify Internet and
  broadband as info services, exempt from Title II
  regulation. FCC gave too much control to states.
• Justice FCC decide not to challenge end to
  leased access provisions.

• States pass laws barring cities from telecom
  services.
• Gov should not compete with private telecom.
• LECs and IX fail to agree to a compromise on
  rates.
• Agreement from LECs not to increase rates until
  2002.
• IX plan exit in anticipation of increase in
  charges.
• Many IX acquired by LEC, e.g. SBC and ATT.

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Effect of FCC Actions

• Broadband is an information service, not a
  telecommunication service under 1996 Act.
• Will be subject to some regulation.
• Question is What?
•  

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Possible Areas of Regulation

• Access
• - On demand, open access
• - Access by multiple ISPs or CAPs
• - Access by law enforcement, 911 service (CALEA)
• - Equal transport all IP traffic
• Pricing
• - Non-discriminatory pricing
• - Cost-based v market based
• - Unbundling rules to separate services
• Sanctions
• - Penalties
• - Enforcement to Investigate and sanction
  violators

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Scope

•  
• Providers of broadband internet access must
  develop and make freely available to competitors
  standards for open access on a nondiscriminatory
  basis a) now b) w/in 2 yrs c) other timeframe
  d) not required.
• Be able to justify the timing of when this takes
  effect. What enforcement should be included to
  make sure the standards are comprehensive and
  facilitate open access.

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Definitions

• Providers of broadband shall be any company
  that provides the following services a)
  regional exchange b) cable c) internet
  service d) electricity e) satellite, f) fixed
  wireless, and
• g) mobile wireless. Select all that apply.

22
Consumer Impact

•  
• Subscriber agreements for broadband service a)
  can b) cannot impose restrictions on
  subscribers regarding,
• a) minimum contract period b) transfer or
  termination of service fee c) exclusivity
  provisions.
• What process to enforce?
•  

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Interconnection Agreements

• 4. Exclusive interconnection agreements with
  LEC and cable
• are b) are not permitted,
• c) for a period of no more than ______years.
• Define the type of exclusive agreements that you
  want to be covered, e.g., subscribers, vendors,
  access providers, service providers.

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Access and Cost

•  
• 5. Access for broadband service shall be provided
  on a basis that is
• Exclusive b) Nondiscriminatory
• c) Open d) Nonexclusive
• The cost of access shall be based upon
• cost-based b) market-based c) volume
• d) other_____________________.

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Access and Cost

•  
• 6. FCC a) shall b) shall not be authorized
  to regulate broadband pricing and services
  under Title a) I b) II c) IV
• d) not regulated e) new provision.
• (Explain the applicable provisions)
• The following exceptions or waivers may apply
  LIST THEM

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Part 2b

• Pricing and Sanctions of Telecommunication
  Services

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Possible Areas of Regulation

• Pricing
• - Non-discriminatory pricing
• - Cost-based v market based
• - Unbundling rules to separate services
• Sanctions
• - Penalties
• - Enforcement to Investigate and sanction
  violators

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Levels of Charges for Internet

• Equipment charges
• Inside and outside line charges
• Monthly service feesand
• Use charges. (Local calls for internet access and
  long distance calls have a use charge.)

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Filed Rate Doctrine

• -Forbids a regulated entity from charging rates
  for its services other than those properly filed
  with the federal or state regulatory authority.
• -Designed to prevent rate discrimination and
  preserve government authority, while limiting
  frivolous suits against the LECs.

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Monthly Service Fee

• Fee for subscribing regardless to how many calls
  you make.
• Flat monthly fee e.g. 4.95

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Monthly Min. Usage Fee

• You elect a plan that gives you a certain number
  of calls. Elect a plan, e.g., 10.00 means you
  get 10.00 worth of calls. If you make less,
  6.00 you are charged the difference-4.00 If
  you made 11.00 then you do not have to pay any
  minimum usage charge.

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Consumer Prices (2001)

• Basic cable rates 33 higher than in 1996
• Basic high speed internet access via DSL 39.95
  ? 49.95 /month
• Cable modem Internet access 39.95? 45.95/
  month
• Voice mail 7.30? 8.00/month
• 411 .90? 1.10/ use
• Subscriber line charge 3.50?5.00
• Calling Card calls .45/min. 2.99 service
  charge
• Operated assisted call .89/min 4.99 service
  charge

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Provider Charges

• Leased access fee LECs charge CAPs 45/line
• LECs charge selves 29/line
• Universal Access fee 1.38 flat ?9.9 of long
  distance call
•  

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ROLE OF GOVERNMENT TO ADDRESS CONSUMER FRAUD

• Watchdog function via reporting and filing
  requirements, e.g., SEC
• Consumer information and trade rules, e.g., FTC
• Licensing with tariff filings by FCC
• Control or regulate the POP by FCC

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CRAMMING

• Unauthorized charges on local telephone bill that
  run the gamut from failure by the service
  provider to clearly disclose the terms of the
  service being offered to the consumer to
  fraudulent charges.

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PROPOSALS TO ADDRESS CRAMMING

• Best practices guidelines
• LECs and clearinghouses have the obligation to
  screen products, services, and marketing
  materials for 3rd party vendors.
• Monitoring complaint levels generated by service
  provider and complaint level thresholds for
  terminating billing services.
• Authorization and verification procedures so
  consumers know what is on bill.
• Toll-free number to file a complaint.
• Customer dispute resolution procedures.
• Cooperation with law enforcement.

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SLAMMING

• Unauthorized switching of your telephone carrier
  without your knowledge or permission.

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PROPOSALS TO ADDRESS SLAMMING

• Customer must report change, and are excused for
  first 30 days after switch. If consumer fails to
  notify carrier, and has paid bill, a credit or
  refund will be issued.
• 2.   Consumers can protect by freezing account so
  that no carrier will be able to make changes
  without consumer agreeing to lift.
• 3.   Website for filing complaints electronically
• 4.    FCC requires Letter of Agency from IX
  before can change.

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Traditional Anticompetitive Efforts by Incumbent
Providers

• Deny entry rights or raise the entry costs to
  potential competitors by
• Selective price cutting or price fixing
• 2. Preemptive remarketing the first submarkets
  to be competitive
• 3. Exclusive contracts between Service and
  Content providers
• 4. Delaying access to telephone poles and
  conduits
• 5. Disrupting exclusive contracts between
  rivals and
• 6. Customer confusion to reduce effectiveness
  of investments.

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Traditional Enforcement Remedies

• 1. REFUNDS OR CREDITS TO CUSTOMERS
• FUND CONSUMER EDUCATIONAL PROGRAMS 
• MANDATE DISCOUNTED RATES 
• FCC PENALTIES 
• LICENSE REVOCATION  
• DIVESTITURE 

41
Consumer Impact

•  
• Subscriber agreements for broadband service a)
  can b) cannot impose restrictions on
  subscribers regarding,
• a) minimum contract period b) transfer or
  termination of service fee c) exclusivity
  provisions.
• What process to enforce?
•  

42
Access and Cost

•  
• 5. Access for broadband service shall be provided
  on a basis that is
• Exclusive b) Nondiscriminatory
• c) Open d) Nonexclusive
• The cost of access shall be based upon
• cost-based b) market-based c) volume
• d) other_____________________.

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Negotiating Position

• Opening Position Best case scenario.
• Negotiating points Level of enforcement, time
  frame, pricing
• Bottom line Compromise that can be enforced and
  address the problem.

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Exercise

• Two friends want to go out to eat. One friend
  wants to go eat steak at the steakhouse the
  other wants fish at the fish market.
• Negotiate a resolution.