FCC Blocks Abandonment of Wired Telephone Networks

pstndead Credit: Level 3 Communications[/caption]

Last week, the FCC again denied a request by wired telephone companies to shut down their networks. This request comes as more Americans are moving away from switched (wired) network telephone lines in favor of the integrated broadband from cable, fiber, and mobile providers. Many are also switching to programs such as Skype as well.

In fact, according to a National Health and Statistics report by the Center for Disease Control, in 2011, fewer than half of all American homes still had wired phone service. That number could drop to 25 percent in 2015, according to a statement by Hank Hultquist, vice president for Federal Regulatory Affairs at AT&T.

The FCC released a public notice late last year that explains its position on these wired networks. In the notice, the FCC touts the benefits of switching from wired phone lines. However, the commission is also trying to be cautious in its efforts, so that groups are not left in the dark.

Most notably, the FCC is looking to initiate “trials” by switching off the wired telephone service of entire geographic regions in favor of the other alternatives, such as voice over IP (VoIP). The delay comes from the FCC attempting to receive comments and recommendations from not just service providers, but the customers these trials would be affecting:

“At least one provider has proposed serving consumers with wireless service in place of wireline service in certain geographic areas,” The FCC said in their public notice. “We seek comment on a trial that would analyze the impact of doing so and, in particular, focus on the consumer experience and ensure that consumers have the ability to move back to a wireline product during the trial.”

Some aren’t buying this explanation by the FCC. Fred Campbell, former bureau chief at the FCC, said he thinks the steps the FCC are taking are inadequate and fail to address the proper issues:

“The proposed trials wouldn’t address the full range of issues raised by the IP transition. As proposed, the trials would address three limited issues: VoIP interconnection, next-generation 911, and wireless substitution,” Campbell said in his blog. “Though these issues are important, the FCC proposals omit the most important issue of all – the transition of the wireline network infrastructure itself.”

Not only is the FCC dragging its feet, it is also costing phone companies billions of dollars. According to a report by Bernstein Research, titled “The State of the Net: 2012,” return on investment (ROI) for wireline services has been on the decline for over a decade. In 2000, wireline service providers saw about a 12 percent ROI. In 2010, of the two companies still providing wireline service — AT&T and Verizon — AT&T saw a 7.2 percent ROI, while Verizon saw a mere 1.6 percent ROI.

The FCC has an unfortunate track record of delaying transitions from the old to the new. In 2009, the FCC continually delayed the switching of television from analog to digital.

As a result, viewership began sharply declining and today, according to Neilson surveys, fewer than 10 percent of Americans watch television on over-the-air signals. This crippled just about every industry invested in over-the-air television, particularly advertisers, to the point where over-the-air television is all, but completely obsolete.