Net Neutrality Friday

This week there were several chunky pieces of news. Most of relates to the conversion to the All IP network. That title itself is a bit of a misnomer because one of the topics covered were copper facilities. There has been significant work on IP Voice Network Interconnection. That looks to be moving forward in a straightforward manner. There is not really a policy issue here as it is more of a technical issue than a business issue. Carriers will want to connect their VoIP networks and there is likely not a big advantage to any specific vendor. Because of that the topic does not have a lot of contention. Much more of a contentious topic is the notice required for the retiring of copper networks. Consumers will get 3 month notice. Competitive Carriers will get 6 months and equivalent services must be offered on the fiber networks. I think this actually presents a bigger challenge as the wholesaling of bandwidth has really only been defined under the old Project Pronto. If a competitive carrier leases facilities (aka UNE-L), there is often no direct equivalent in Fiber networks. Many such networks use Passive Optical Network technologies. These networks have a shared physical infrastructure between many end customers. Copper networks provided dedicated facilities. There is no rational way to lease a fiber unless a point to point fiber construction plant has been created. All of this will create challenges until things are understood clearly from cost, price and service standpoints. This could slow fiber deployments theoretically, but I suspect that it will not do so much. I think we will see a lot of whaling and gnashing of teeth on this one, but nothing really important will happen.

Another topic this week was a way to look into cost modeling rural broadband applications. The challenge here is that the model has been being made for the Rate Cap (read Larger) carriers and applied to the Rate Base (read Smaller) carriers. Rate Base carriers follow the older model of how carriers get paid. In the olden days, telephone companies got paid a fixed rate of return based upon how much money they spent on equipment. This became known as the rate base. Because of this, telephone companies were a very stable investment for shareholders. Most carriers converted to Rate Cap carriers later to be able to get a better stock price and remove some other regulations lessened. In this case, the charges of the carriers are capped and they can spend whatever they want to make that revenue. Very small carriers are sometimes still Rate Base carriers and are subsidized by the US Government to make their revenue. They don't charge up to their Rate Base (in other words their customers don't cover the telephone company's costs). Instead, the gap between what they can charge (same as the Rate Cap carriers) and what they spend is covered by the US Government. The problem is that these new cost models are for the larger carriers and won't work for the smaller ones.

My opinion is that these very small carriers probably don't make sense in today's environment anymore. We need to be looking to the States to help them combine so that they can have enough bulk to become Rate Cap carriers. This can be done with other small carriers or potentially rural spin-offs of larger carriers. However, there will be resistance to eliminating these historical part of the landscape. Jim Sackman Focal Point Business Coaching Business Coaching, Executive Training, Sales Training, Marketing

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