1 Regulation of the Internet: The Hows and Whys of Telecommunications Reform John Windhausen President, Telepoly Consulting Wendy Wigen Policy Analyst, EDUCAUSE

2 What is Driving the Effort to Re-Write the Telecom Act? What is being proposed? What does the higher education community support?

3 What is Driving the Effort to Re-Write the Telecom Act? 1.Telephone Companies Seek Broadband Deregulation (Parity with Cable) 2. Small Telcos concerned that VOIP will erode universal service revenue. 3. Bell Companies Seek to Preempt Cities from Regulating Internet Video What do all three issues have in common? They are all fueled by growth of the Internet.

4 Chapter 1: Background Purpose of the Communications Act of 1934: …to make available… to all the people of the United States… a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges. Authority: Gave very broad authority to the FCC.

5 Structure of the 1934 Communications Act General FCC Authority Spectrum Licensing BROADCAST TV AND RADIO Title I LAW Title IITitle III Common Carrier VOICE PHONE CALLS

6 Results under the Communications Act of 1934 Bell Companies (AT&T) build telephone networks serving 80% of the U.S. population. The Rural Utility Service provides grants and loans to small mom and pop phone companies to cover the remaining 20% of the population, resulting in 1400 independent telephone companies. U.S. Telephone penetration at 94%, one of the best in the world.

7 1980s: New Services Bring Stressto the 1934 Act Structure Data Communications over Telephone Company Facilities FCCs Computer I, II and III Decisions create a basket of Unregulated Information Services. Cellular service developed slowly. The FCC initially awards only two licenses per market. Cable TV systems deployed gradually, as cities demand parks, production studios, money in paper bags, etc.

8 Congressional Action Spurs Deployment of Cable and Wireless Technologies Cable Act preempted local authority over rate regulation, established federal rules (and FCC authority) over cable prices and programming Spectrum Auction Act made new spectrum available for 3-5 PCS licenses to compete with cellular.

9 Mid-1990s Communications Policy Common Carrier VOICE PHONE CALLS And later DATA WIRED And later WIRELESS Spectrum Licensing BROADCAST TV AND RADIO And later WIRELESS VOICE (Private radio, Cellular, PCS) SATELLITE CABLE TELEVISION Title II Title IIITitle VI Unregulated: Enhanced Services Data processing, AOL, ISPs REGULATEDREGULATED General FCC Authority Title I

10 Telecom Act of 1996 Imposed Unbundling Obligations on the Bell Companies in return for allowing them into long distance. Opens the local phone market to competition. Requires the FCC to promote advanced services. (section 706) Banned Internet Porn.

11 Results of the 1996 Act: Local telecom competition has stalled at about 15% of the market. Over investment in low-speed broadband facilities. Low-speed broadband now available to over 90% of US Homes. But only 30% subscribe, putting US 16 th among Developed Countries. Cable and Telcos now compete for Broadband service, but operate under different rules.

12 Chapter 2: And Along Comes the Internet…. We could have killed it but we wisely chose not to…. FCC 1999 We havent regulated it because we didnt know how to… Senator Cantwell 2004 First, do no harm… Michael Powell, former Chairman of the FCC

13 Internet Regulation Telecommunications Service: Provides basic transmission service to the general public for a fee Highly regulated Behavior (anti-trust, consumer protection…) Revenue (USF, 911…) Information/ Enhanced Service (including Internet Services): Provides enhanced communication service that involves data storage/processing i.e. Internet access, voice mail…. Data is manipulated or acted upon Unregulated

14 But what if… Broadband transmission is bundled with IP Service, Voice over IP competes with Traditional Voice, and Video over IP compete with cable???

15 3 Questions: Should DSL and cable modem transmission services be regulated as telecom or info services if they are used solely to provide access to broadband info services? Should VOIP be regulated as a telecom service or info service? Should Video over IP be regulated as a telecom service or a cable service?

16 Answer #1: Information Services. Common Carrier High-Speed Network Facilities Dial-up CABLE TELEVISION Title II Comm. Act Title VI Unregulated: Information Services REGULATEDREGULATED S. Court Cable Modems FCC DSL and Other Telco Broadband

17 Answer #2: VOIP is ? VoIP breaks the mold. It is voice as a data service. Considered another way, the 1996 (Telecommunications) Act assumes that data applications operate on top of a regulated voice network. VoIP, by contrast, delivers voice on top of an Internet protocol data channel, which can run on any type of digital network. …. Kevin Werbach

18 What if a lot of people switch to VoIP? What happens to: 1.Law Enforcement Access (CALEA) 2.Emergency 911 Service (Public Safety) 3.Access for the disabled (Disabilities Act) 4.Support for the Universal Service Fund 5.State revenue…. 15%

19 Answer #3: Telecom Services? Common Carrier High-Speed Network Facilities Dial-up CABLE TELEVISION Title II Comm. Act Title VI Unregulated: Information Services REGULATEDREGULATED Congress? VOIP

20 Answer #3: ? What if a lot of people switch to Video over IP? What happens to public service requirements? What about franchising rules: $$$ and control. If the Bell Companies receive a national franchise to provide video, why should the cable companies continue to subject to municipal control?

21 Answer #3: Info Services? Common Carrier High-Speed Network Facilities Dial-up CABLE TELEVISION Title II Comm. Act Title VI Unregulated: Information Services REGULATEDREGULATED Congress Video Over IP

22 Convergence and Competition 1.Deregulate and let the market sort it out…. Use anti-trust law to deal with unfair competition. (mature industry i.e. railroads, airlines) 2.Status quo: The law is sufficient as is, it just needs to be enforced and clarified. 3.Issue-by-Issue: Separate bills on each topic. 4.Write a new law based on how IP systems work.

23 Chapter 3: What is the higher education community doing?

24 Higher Education View of The Internet The Internet should remain an open and innovative network. Broadband connectivity is available and affordable to as many persons in this country who want it. Broadband offers speeds that allow, not just advanced entertainment, but advanced: Education Medical services Government Services

25 The United States not only continues to compete but to lead in information technology.

26 Higher Educations Perspective The United States should adopt as a national goal: A fast, affordable, ubiquitous broadband Internet An Internet that is open to all persons, lawful content and applications A policy that promotes fair and open competition A policy that guarantees the right of communities to build and operate their own networks A policy that supports and funds continued academic research into Internet technologies and applications

27 More Information EDUCAUSE Policy Website