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In this edition of Views and News, ETI examines a recommendation that the FCC "sunset" the PSTN by 2018--along with its regulation of PSTN services. We also review a recent regulatory case in which Verizon insisted on litigating with a consumer over $4.19. Finally, we take a quick look at growing divide in the wireless market as evidenced by Sprint and Verizon's second quarter earnings results.
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The End of the PSTN as we know it?
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At its June 29, 2011 meeting, the FCC’s Technology Advisory Council (“TAC”) received a report from its “Critical Legacy Transition Working Group” addressing the “Transition from the PSTN [Public Switched Telephone Network] to an all IP Network and future technologies.” The Working Group projected that by 2018 only 6% of US households will still retain a traditional copper wireline local exchange access line as their primary voice service, not having “cut the cord” and replaced their wireline phone with wireless or some other “new” technology. Based on that projection, the Working Group proposed that the TAC call on the FCC to “[t]arget 2018 as the end of the PSTN.”
A call for the FCC to “sunset” the “PSTN” as the term is being defined by the TAC is, in reality, yet another effort to insulate wireless and IP-based services from traditional forms of telecommunications regulation. Indeed, the TAC group is urging precisely that outcome. What this proposal fails to recognize or understand is that the basis for telecom regulation is market structure, not technology, and the migration to wireless and IP-based technologies has not and will not alter the fundamental economics of telecom services and networks – high fixed costs, significant economies of scale and scope, and formidable barriers to entry that preclude a competitive outcome in the absence of economic regulation.
The TAC is “comprised of a diverse array of leading technical experts that assist the Commission with identifying important areas of innovation. The TAC will develop informed technology policies supporting America’s competitiveness and job creation in the global economy.” While the FCC can surely benefit from forward-looking perspectives of technology futurists, the group’s conclusion that the PSTN is ready for hospice care as it confronts impending death appears to stem from an unduly narrow view of the PSTN and its critical role in facilitating and assuring universal connectivity across all telecom technologies and among all elements of American society. Seen in that context, the PSTN is far from dead, and the TAC’s apparent misunderstanding of the PSTN and its place in the US telecom infrastructure has the potential to drive policy in a seriously wrongheaded direction.
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Verizon litigates – and loses – a dispute over $4.19
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Verizon, it would seem, considers no dispute with a consumer too small to fight over – even where the amount involved is only $4.19! In a consumer complaint case decided in June by Pennsylvania Public Utilities Commission Administrative Law Judge Mary D. Long, Verizon not only failed to prevail in its position on the matter, but got its hands slapped in the process.
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The wireless gap: The biggest get bigger while the small struggle for survival
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For the four major wireless carriers, July 28, 2011 was a day of good news and bad news. First, the bad news. Sprint Nextel announced its earnings: After having increased its spending on marketing to stem market share losses and after continued subscriber attrition, Sprint lost nearly $850-million in the second quarter of 2011. Sprint hasn’t turned a profit since before 2007, and its inability to grow its base of lucrative post-paid subscribers (despite success in the less profitable pre-paid segment) does not bode well for the company’s future. Sprint has not yet released an official statement of cash flows for the quarter, but if the first quarter is any indication, Sprint has entered a dangerous zone of incurring both accounting losses and hemorrhaging cash. Investors did not take this news lightly: Sprint stock closed down nearly 16% on the news.
After the markets closed on July 28, Verizon Wireless announced its good news...
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About ETI. Founded in 1972, Economics and Technology, Inc. is a leading research and consulting firm specializing in telecommunications regulation and policy, litigation support, taxation, service procurement, and negotiation. ETI serves a wide range of telecom industry stakeholders in the US and abroad, including telecommunications carriers, attorneys and their clients, consumer advocates, state and local governments, regulatory agencies, and large corporate, institutional and government purchasers of telecom services. |
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