These issues are probably the toughest ones facing users of the Internet
right now and I would be interested in seeing your opinions about this
Policy Statement.
Thanks,
Norm Jacknis
----------
INFORMATION POLICY NOTES
January 23, 1997
CPT statement at FCC forum on Available Bandwidth
(and network congestion)
[An html version of this document is at
http://www.essential.org/cpt/isdn/bandwidth.htm, print from the email
version, use courier 10 point, with 1 inch margins]
Comments on the
FCC forum on Access to Bandwidth
James Love
Consumer Project on Technology
http://www.essential.org/cpt
202.387.3030; fax 202.234.5176; love@tap.org
January 23, 1997
We are pleased the Commission has scheduled today's forum on access to
bandwidth. With the rapid emergence of the Internet as the world's most
dynamic information technology, the most vexing problem concerns the poor
choices available for most residential consumers. Information services
that are delivered over today's analog modems are severely constrained by
the limited bandwidth. We are also faced with a massive public relations
effort launched by several major local exchange carriers (LECs), making a
number of alarmist and often misleading statements about congestion of the
public switched telephone network.
1. Accounts of Network Congestion Are Greatly Exaggerated by the LECs
To read current newspaper accounts, one would think the public switched
telephone network is about to collapse due to heavy use by residential
consumers dialing into Internet Service Providers (ISPs). In fact, there
is no evidence that current residential modem usage is placing greater
demands on the public switched network than non-modem usage. Bell Atlantic
and other LECs cite studies to suggest that residential modem calls are
longer than voice calls, but this is hardly conclusive. One 20 minute
modem call is certainly less of a burden on the network than 100 five
minute voice calls, for example. To the degree that network costs can be
allocated on the basis of usage, one would typically look at the total
number of calls and total minutes of connection. Because call setup
consumes network resources, one long call is actually cheaper than several
shorter calls which sum to the same total minutes.
What are the data on usage? Let's look at the American Online Experience.
Prior to its new flat rate offering, AOL consumers reportedly logged on
for an average of 14 minutes per day, or about 7 hours per month. After
the flat rate plan was implemented, usage reportedly jumped to about 32
minutes per day, or about 16 hours per month -- hardly earth shattering
numbers. These data are not that much different from independent studies
by Yankelovich, Nielsen and others, who report average usage of 12 to 22
hours per month for various online or direct Internet service providers.
The average connect times are likely growing, but they remain far lower
than one might imagine.
There is another way to look at usage. The ISPs have limited capacity in
terms of incoming lines. Before the flat rate, AOL reportedly was
engineered to allow about 3 percent of its consumers to connect at any one
time. Now AOL is expanding its network, so that it will have about 400,000
incoming lines, for about 8 million customers -- about one line for each
20 customers. This will permit 5 percent of the AOL customers to be
connected at any one time. Based upon our research, most ISPs have 10 and
20 customers per incoming line, allowing a maximum of 5 to 10 percent of
customers to be connected at any one time. This is a hard constraint on
residential consumers. They can't connect in larger numbers because the
ISPs have limited capacity.
How does this compare to capacity on the public switched network? Bell
Atlantic says the residential voice network is built so that 1 in 7
consumers can connect at any one time -- or roughly 14 percent. Thus,
after the AOL expansion of its network, when it can accommodate 5 percent
of its customers, it will be using at most roughly one third the capacity
of the public switched telephone network. Clearly residential data calls
cannot be the source of congestion of the public switched network.
Of course, residential consumers are calling ISPs, and the ISP incoming
lines may be used intensively. This doesn't have anything to do with the
way the residential consumers call. Regardless of whether the residential
consumers called 5 hours per month or 150 hours per month, the ISP would
have an incentive to purchase the number of incoming lines that gave
customers an acceptable level of service. Indeed, any business line user
makes a similar calculation.
For additional discussions of congestion issues, see Fred Goldstein's
November 1996, Maryland ISDN testimony, at
http://essential.org/cpt/isdn/MD-fgoldsteintest.html.
2... We Need To Move Toward An Architecture That Permits Permanent Digital
Residential Connections To A Wide Area Network.
While current levels of residential Internet usage do not place noticeable
demands on the public switched network, one can imagine a future where
everyone, or at least everyone who wanted to, would have a permanent
digital connection to a wide area network. For this type of connection,
one would expect something different than the current public switched
network architecture. There are likely competing visions of how this can
be accomplished: through a variety of xDSL technologies, cable modems,
wireless connections or other alternatives. This is something we want to
migrate to. One can imagine broad deployment of new technologies sometime
in the next ten years. But what about now?
3. The Best Available Here-And-Now Residential Technology is ISDN
If we could use press releases to surf the Internet, everyone would be
using cable modems, ADSL, or satellite communications to get fabulous last
mile bandwidth. Unfortunately, these new services have been over-promised
and under-delivered. ISDN is the best ubiquitous technology for higher
speed connections. What types of services can be delivered over ISDN? Very
high quality audio, and rough but interesting video. Moreover, ISDN can
provide a very fast launch and disconnect, and multiple ISDN lines can be
bonded together for greater bandwidth. ISDN is something that can be done
right now.
4. High Prices For Residential ISDN Have Stifled Deployment
The problem isn't technology -- it is monopoly pricing by the LECs. In
Japan, residential ISDN is priced about $10 per month more than a POTS
line. In some European markets, there is no difference between POTS and
ISDN rates. Many U.S. businesses pay no extra for ISDN voice service. But
in the United States, some LECs are charging very high fees for
residential ISDN connections. While interest in the Internet is exploding
and there is a great hunger for more bandwidth, the LECs are killing ISDN
as a transition technology, both through high pricing, and by sending a
signal to consumers and information services developers that the
technology has an uncertain future.
The most annoying features of these high prices are stiff usage charges.
Nynex, Bell Atlantic, U.S. West, PacBell, GTE, and other LECs have filed
tariffs asking for fees of 1 to 3 cents per minute (per B channel) for
making local calls. Meanwhile, several LECs are providing cost data to
PUCs indicating that their own estimates of direct usage costs are closer
to 10 to 12 cents per hour, or 6 to 17 percent of the per-minute charge
billed to ISDN users. US West and Bell Atlantic offer complex "call pack"
options, that give consumers deep discounts on usage, but only if they
pre-pay for usage they may never need. Under these plans pre-paid ISDN
usage costs $.75 to $.10 per hour (per channel), depending upon the size
of the call pack.. Larger users typically get the largest and deepest
discounts. (See http://www.essential.org/cpt/isdn/tables.html)
Not every state or company has high residential ISDN rates. While
Ameritech charges one of the highest prices in the country to consumers in
Indiana, it offers flat rate ISDN service in Ohio, Wisconsin, Illinois and
Michigan at $26 to $34 per month. Bell South charges $79 in North
Carolina, but only $30 in Tennessee. U.S. West rates vary from state to
state, depending largely on the views of state regulators. In Utah, the
PSC recently ordered a set of call-pack and flat rate options which ranged
from $30, for 50 hours, to $64, for flat rate service. Roseville, an
independent telephone company in California, offers a voluntary flat rate
tariff of $29. The largest California LEC is PacBell, and it now charges
$24.50 per month, with unmetered usage after 5pm and on weekends. (See
also, http://www.essential.org/cpt/isdn/survey20.html)
In our view, one of the most interesting telephone companies in the United
States is the Northern Arkansas Telephone Company (NATCO). NATCO is a
surprisingly sophisticated rural LEC, run by Dr. Steven Sanders, who holds
degrees in engineering and physics. NATCO offers flat rate residential
ISDN for $17.90 per month, roughly $7 more than the cost of POTS. To
encourage ISDN usage, NATCO offers free Internet connectivity to its
customers. Dr. Sanders believes ISDN is potentially very important for
rural communities, who are unlikely to see deployment of cable modems or
ADSL for many years.
5. NTS Costs Of Residential ISDN Are Less Than $5 Per Month More Than POTS
In the recent FCC proceeding on ISDN and the Subscriber Line Charge, five
LECs reported the ratio of POTS and BRI ISDN costs for local loop only
costs, as well as for all non-traffic sensitive (NTS) costs. This data was
reported in the current NPR, on page 36. As a group, the companies
reported local loop costs lower for ISDN than for POTS. For all NTS costs,
the companies say BRI ISDN costs are 24 percent higher than POTS. If NTS
costs are in the neighborhood of $20 per BRI line, the additional costs of
ISDN would be less than $5 per line. These are averages, and some
companies reported lower figures, of course. For example, US West said the
NTS cost of BRI ISDN was $18.52, only $1.18 higher than its NTS cost for
POTS. (In the Matter of End User Common Line Charges, FCC Docket No.
95-72, Appendix A , filed June 29, 1995).
When competition exists, LECs have priced ISDN more aggressively. For
example, ISDN Centrex is often priced far below available residential
rates. In at least one Bell Atlantic state, the LEC claimed that usage
costs for ISDN Centrex, a service facing competition from PBX vendors,
were less than $1 per month.
6. Regulators Need To Keep One Eye On The Present, And One Eye On The
Future.
Government regulators and policy makers must live in the present and plan
for the future. If new technologies like cable modems or ADSL are truly
seven years from widespread deployment, we must do something about the
present. To put things into perspective, consider that seven years ago the
Internet was barely visible to most Americans, 2,400 baud modems were
fast, Netscape and other graphical web browsers had not been developed,
there was no RealAudio, no Yahoo, and no intelligent agents to gather
information for consumers. Seven years is a long time for the Internet,
and if we have something much better than analog modems now, we shouldn't
wait seven years before we have faster residential connections.
We also want to move toward a true data network. Vendors of network
facilities now believe they can take incoming calls at the Central offices
and route data calls to ISPs on a more efficient data network before they
consume scarce switch and interoffice trunk resources. Unfortunately, Bell
Atlantic and other LECs are not pricing this service competitively.
7. Regulators Need To Protect ISPs Against Anticompetitive Actions By
LECs.
Bell Atlantic wants regulators to increase tariffs selectively on ISPs, so
that POTS and ISDN lines will be priced high enough that the new packet
switched services will become more attractive. If I owned Bell Atlantic,
I'd ask for this too. Not only will this help Bell Atlantic market a new
service, but it will raise costs for unaffiliated ISPs, which compete
against Bell Atlantic's own in-house ISP service.
The Commission should be wary of proposals that would impose new fees on
ISPs which compete with LECs. In California, PacBell was petitioning the
FCC to eliminate the ISPs enhanced service exemption (ESP), because of the
alleged congestion problems that Internet users are imposing on the public
switched network. At the same time, PacBell was promoting second
residential telephone lines, priced at $11.25 per month, by running
promotions that read:
Order another home phone line today and get 5 months free unlimited
Internet access with Pacific Bell Internet. Act now and we'll waive the
usual $14.95 sign-up fee for Pacific Bell Internet.
Aside from the outrageous hypocrisy of running both this promotion and a
PR battle that asserted Internet users were causing unbearable network
congestion, it demonstrates the dangers facing independent ISPs. If you
ran a California ISP, wouldn't it be hard to compete with a firm that was
giving the service away free for 5 months?
Indeed, several LECs are running promotions for residential second POTS
lines. These are typically priced below what the company claims are its
average NTS costs. The lines also do not typically generate any new toll
traffic. (People don't get second lines to make two long distance calls at
the same time). Since these second lines are marketed to modem users, one
has to doubt the LECs complaints about network congestion. It is also
reasonable to assume that the $11.25 per month for a PacBell second line
is actually above PacBell's costs.
8. Possible Incentives For Better Bandwidth Management.
Here are a few thoughts on possible incentives for better bandwidth
management.
A. Flat rate or so called "virtual flat rate" (a service with a 200 hour
usage allowance) tariffs give the LECs an incentive to solve bandwidth
management problems. Metered usage tariffs take those incentives away,
since anything that gets consumers off the meter reduces LEC revenues.
Push for flat rate tariffs, or tariffs with large usage allowances, such
as the 200 hour allowances proposed for PacBell. If possible, don't meter
off-peak usage.
B. Rather that impose new usage fees on ISPs or residential users of POTS,
consider the elimination of usage charges on ISDN and other higher
bandwidth digital services, when calls are routed away from the circuit
switched network to a more efficient packet switched network. Give ISPs
and consumers a positive incentive to use both higher bandwidth
technologies and the packet switched networks.
C. Reward LECs for good deployment of ISDN or other digital services,
punish LECs for poor deployment. I would use a formula that would compare
each LECs penetration of residential ISDN and other digital services to
the average penetration level for all LECs. LECs with poor penetration
should make larger payments to the Universal Services Fund than LECs with
good penetration.
D. Unbundle network elements on a flat rate basis, so that new entrants
can deploy new digital services without high usage charges. Don't permit
LECs to charge per minutes fees for the local loop.
E. Officials in Japan are concerned that the U.S. is far ahead on the
development of the Internet, and they attribute this lead to the U.S.'s
flat rate pricing for local telephones. NTT has introduced a modest flat
rate off-peak calling plan, which works for two telephone numbers -- one
for a bulletin board, and one for an ISP. It would be interesting to know
if prior registration of telephone numbers would make it easier to take
data calls off the circuit switched network.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++
INFORMATION POLICY NOTES is a free Internet newsletter sponsored the
Consumer Project on Technology (CPT), a project of the Center for Study of
Responsive Law, which is run by Ralph Nader.