Wednesday, August 25, 2004

Reading :: Communications Policy and the Public Interest

Originally posted: Wed, 25 Aug 2004 19:53:26

Communications Policy and the Public Interest: The Telecommunications Act of 1996

by Patricia Aufderheide

If you were to write a short sociotechnical history of the US telecommunications industry -- and alas, I plan to do just that fairly soon -- there are a few large events you would have to address. One is the establishment of the Bell monopoly, more or less enshrined in the Communications Act of 1934. Another is the 1982 Modification of Final Judgment that broke Bell into AT&T (long distance, competitive) and the Regional Bell Operating Companies (RBOCs: local area, regional monopolies). And the third is the Telecommunications Act of 1996, which (among other things) opened up local telephone service to competition and mandated that RBOCs share their network infrastructure with competitors until those competitors could build their own facilities.

Facilities are what this fight is all about, of course. Bell established its monopoly in part by building the infrastructure when building infrastructure was relatively cheap. Imagine having to build your own facilities to compete in the local phone market: arranging for right of way, erecting telephone poles, laying cables, setting up a local loop, wiring jacks into people's houses, hiring workers to troubleshoot the physical network (which constantly decays and must be repaired). Ideally competing companies can do all of these -- and indeed they're beginning to do so -- but they couldn't be expected to do all that at once, and even if they did, consumers might have a hard time trusting them. But for a long time the question was moot, because Bell would let nothing -- nothing -- attach to its network. In fact, in the 1950s Bell sued a company that manufactured the "Hush-a-Phone" -- a small plastic cup that you attached to the phone mouthpiece so that you could speak softly (pp.21-22). Bell claimed that even this plastic attachment threatened the integrity of its network; the repercussions of this foolish claim led eventually to our present state, in which RBOCs must let companies attach to their networks. In a way, Bell was right: Hush-a-Phone contaminated and changed the nature of the entire network.

Bigger changes were in the offing, though:

Digital processing has changed the very characteristics of communications networks. Rapidly evolving computing that is based on distributed processing has made it possible to decentralize networks. Many of the decisions once made in large centralized switches are now made at intermediate stops or even within the consumer's telephone. Along with increased flexibility and the potential to reconfigure the very shape of networks and subnetworks, decentralized data processing has dramatically increased the amount of intelligence -- or the ability to respond to input and take action -- in communications networks. This innovation provides a fundamental challenge to the notion of common carriage, or the restriction of network providers to transmission alone, because the clear lines between content and conduit have become muddied. Networks themselves have information, or content, built into them. (pp.10-11)

That's the present state. And it's what allows the snarl of telecommunications infrastructures -- their name is Legion -- to work together coherently and appear to provide unified, uninterrupted service. Not by themselves, of course, but through the negotiated and legislated agreement known as the Telecommunications Act of 1996. The Act is examined and dissected in this book in terms of its history, development, negotiations, and repercussions. Aufderheide is not a sociotechnical theorist, at least not in the terms of the sociology of knowledge, but she does a good job of examining the workings of the Act and providing us with enough information to begin such an analysis.

For instance, she dissects the notion of universal service, a chimeric term that has been reinterpreted throughout the history of US telecommunications. The 1934 Act, for instance, stated its overarching purpose as "to make available, so far as possible to all the people of the United States, a rapid, efficient, nation-wide, and world-wide wire and radio communications service with adequate facilities and reasonable charges" (qtd. on p.18). AT&T raised long-distance prices to pay for investment in universal service -- "an important claim of social benefit, which could discourage adoption of a competitive model of service provision" (p.18). Of course, once a competitive model was introduced, AT&T's strength became its weakness. "In 1969, MCI won the right to attach to the AT&T network in order to offer what then were merely private network services for corporations" (p.22), and that attachment was free of universal service requirements. "The decision fundamentally challenged the old logic of cross-subsidy. AT&T charged the upstarts with 'cream skimming' -- taking the high-dollar clients and leaving AT&T with the large, expensive network to service" (p.22). Eventually, after the MFJ, universal service became a contribution from long distance service to local service (p.57).

This conflict in part drove the move toward deregulation, an attempt to move from the monopoly model to a competitive one. But how to maintain the commitment to universal service? One deregulative idea was for the government itself to offer "phone stamps," modeled on food stamps, directly to disadvantaged consumers. Imagine. Another, more decentralized version was described in Peter Huber's 1987 study The Geodesic Network: In a decentralized network, "each supplier can independently provide end-to-end service, and yet suppliers as a group can offer universal access. by providing horizontal links among their networks" (qtd. on p.29). Eventually, universal service was operationalized in the Telecommunications Act of 1996 as subsidies provided by providers to K-12 schools, libraries, and similar nonprofit parties at discounts of 20% to 90%. The discounts were set based on "poverty level, as measured by school lunch eligibility" (p.100) -- a wonderful illustration of how different sociotechnical networks can be spliced together.

Another interesting case is that of local service. In the MFJ, the RBOCs had been granted limited monopolies in local service. But with the Telecommunications Act of 1996, competitive local exchange carriers (CLECs) were allowed to compete. Ideally, as I mentioned earlier, these companies would build their own infrastructure; realistically, the price of entry was far too steep. So the Telecommunications Act mandated that in the short run, RBOCs must provide their services at a discount to the CLECs, which could then repackage that service and resell it to consumers at competitive prices. Eventually, the Act envisioned the CLECs bootstrapping themselves: building their own physical facilities, providing hardware-to-hardware or facilities-based competition (p.44). The Act "leaves to the FCC and to states (in an unclear formulation) the determination of what price is fair for resale"; mandates number portability; disallows mandated access numbers; and sets up payment arrangements for calls that traverse multiple competitors' networks (pp.63-64). Of course, once again the competitors cream-skimmed: By 1998, CLECs controlled 1% of local lines, but those lines represented 3% of local phone revenues, because the CLECs aggressively pursued business rather than residential lines (p.84).

I enjoy reading histories because they give interesting insights into how our world became the way it is, and this one was in general engagingly written. Aufderheide injects occasional flashes of humor that keeps the book lively. More importantly, the book keeps track of stakeholders, their influences, and their negotiations as the book moves inexorably to the passing of the Act and its repercussions.


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