Only 5% of U.S. households rely solely on traditional home phones and that means the current regulatory framework is lagging the marketplace and siphoning off investment from new infrastructure.
That is according to a just-released report from the Internet Innovation Alliance, a broadband adoption and deployment advocacy group whose 175 members include AT&T and fiber-maker Corning.
The report, from analyst Anna-Maria Kovacs, finds a "plethora of choices" for voice, video and data, including wireless devices, cell phones, wired Internet VoIP and Internet applications (Skype), and that 99% of communications traffic is now IP-delivered. She said that despite the speed differentials between wired and wireless — wired is faster — wireless is a legitimate competitor and could deliver even a competitive video service.
From the end users perspective, she said, it would be possible to make them happy with LTE, as well as fixed wired broadband.
The report concludes that "although only 5% of households rely exclusively on traditional circuit-switched POTS, and only 1% of U.S. traffic is circuit-switched, regulators still require incumbent phone companies to maintain their legacy networks even where they upgrade to IP over fiber-fed infrastructure." By contrast, cable and wireless networks, and Google's fiber-delivered broadband services, are free of similar government mandates.
The report finds that phone companies are spending over half of their infrastructure investment on maintaining legacy nets per government requirements, even where they are offering new broadband nets. Honorary IIA chair Rick Boucher said Tuesday that every dollar spent on supporting an outdated circuit-switched network is not being spent on networks consumers prefer, an encumbrance that cable ops are not saddled with in providing their voice, video and data service.
"Dr. Kovacks estimates that the incumbents spent a total of $154 billion on their communications networks," said IIA in promoting the study, which was paid for by its members. "More than half of that was spent on maintaining fading legacy networks, leaving less than half to upgrade and expand their high-speed broadband networks. In contrast, cable providers, who are free from legacy network rules, spent a total of $81 billion in capital expenditures over the same six-year period and were free to dedicate all of it to their broadband infrastructure."
AT&T, for one, has been pushing the FCC to allow for geographic tests of the switch from traditional copper lines to IP delivery and not to carry over legacy regs to new delivery systems but has gotten pushback from groups concerned about preserving interconnection mandates and 911 service.
At a speech to the Media Institute last month, AT&T D.C. executive James Cicconi suggested AT&T was not looking for a get out of regulations free card when it moved from legacy to IP delivery. "AT&T understands that we are not moving into a regulation-free zone. We get that," he said. "But it would be just plain dumb to take regulations designed for a monopoly Bell System and try to apply them to modern, competitive Internet communications."
Kovacs said that consumer protections and 911 must remain available, but that "regulators should acknowledge the reality that a majority of consumers today rely heavily on multiple IP-enabled wireless and wired network infrastructures and means of communications."
Both Kovacs and Boucher said the transition would not be a flash cut, but that the incumbent carriers should not be required to continue to pour money into legacy nets that carry only 1% of traffic. Kovacs and Boucher also suggested IP transition trials would be helpful to gather information on what modifications will be needed.
Kovacs said the trials could be over any platform, but likely the intent would be to do either fiber of U-Verse, which is mostly fiber, rather than wireless.
The study was paid for by IIA members, but not any of the telcos particularly, according to Boucher.