FROM TRADITIONAL LANDLINE TO IP TELEPHONY:

A POSSIBLE ANOTHER WAY

Bill LevisColorado Consumer Counsel

bill.levis@state.co.usJune 10, 2013

How did it all begin?

• Telephone started unregulated

• Result - confusion and competition

The Bell System• Theodore Vail pushed

one system, a “natural monopoly”

• Result (except in rural areas) national system which controlled wires, rates and equipment that customers rented at exorbitant rates

• 1934 Communications Act-universal voice service

“One Policy, One System” Challenged• Over time, anti-trust cases addressed abuses of

Bell System• Carterfone decision allowed customer premise

equipment in 1968• MCI Execunet (long distance) decision in 1976.

Company originally applied for authority in 1963• Bell System broken up as of 1984 into seven

regional operating companies and AT&T long distance

• 1996 Federal Telecom Act and state laws allowed local competition and set up current universal service requirements

What was the impact?• Number of traditional landline phones cut almost

in half since 2000– Residential subscribers dropped almost two-

thirds• 2000: 190 million (145 million residential)• 2011: 107 million (less than half residential)

• Increase in cordless phones which are unreliable• Interconnect VoIP phones increase– 2008: 22 million – 2011: 37 million (31 million residential)

• VoIP subscribers continue to increase

When I was your age we didn’t play video games or take photos or locate things – we just did one thing

and we took our sweet time doing it

Continued Wireless Growth• More than one wireless phone per person – 326 million at end of 2012 vs. 141 million ten

years earlier– U. S. population 316 million in May 2013

• Lifeline program (vast majority of phones being provided to low income wireless); questions of need vs. abuse

• Center for Disease Control report (December 2012) – 52 percent of adults in poverty, 42 percent in near

poverty in wireless only homes – 60 percent between ages 25-29 and 55 percent

between 30-34 wireless only vs. 26 percent 45-64 and 10.5 percent 65 or older

Changes in the States

• 21 states have high cost funds separate from federal universal service fund

• Some states phasing them down in part because of lifeline program

• More than half the states have deregulated telecom, especially wireless and VOIP

• Once deregulated legislatively, hard to go back

2013 State Legislative Update

Lots of Questions and Concerns• What is definition of basic service today?• Are we talking about voice or video?• How do we define broadband?– Already, 4 mbps down and 1 mbps up in Connect

America Plan outdated – NTIA May 13 report– Speeds increasing over time for DSL, wireless, fiber

and satellite– Schools and libraries access being updated– Should homes in rural areas receive same speeds?• If so, how?

– How to define Lifeline?– Emergency service: Derecho, Hurricane Sandy,

Western fires• Reason why Colorado bills failed

Bottom Line – Possible Another Way• Who will pay and for what?– Consumers– Providers

• Issue of Competition vs. Monopolization– Among Technologies– Considering Satellite

• Government Oversight and Public Interest– Emergency service, however defined– Complaint and service quality jurisdiction, regardless

of technology– Rate regulation in areas with no competition– VoIP and Broadband where Telecom Service

Is this the ultimate solution?