Blog

The VCXC - Voice Communication Exchange Committee - is a Washington, DC based startup nonprofit, modeled on the Advisory Committee on Advanced Television Service.

A New Beginning in 2013 by Daniel Berninger

A detente between warring telco's and an embrace of the transition to all-IP networks in 2013 ends the cause for 100 years of government intervention in telecom - interconnection. December 19, 2012 marks the 99th anniversary of the Kingsbury Commitment and the arrival of government as arbiter for telecom industry interconnection disputes. The present stalemate regarding IP network interconnects needs to end long enough to discover all-IP networks align interests in favor of the type of Moore's Law continuous improvement and non-zero sum game driving the information technology industry. A failure to embrace the transition to all-IP networks in 2013 promises to leave telecom subject to PSTN obligations and drag the Internet into the network interconnection fray.

The November 7, 2012 announcement of AT&T's $14bn Project Velocity IP aligns the descendent and namesake of the old AT&T monopoly with the all-IP network future. Regulatory disputes over means (compulsory obligations) seem unnecessary given broad agreement about ends (all-IP networks). A telecom industry detente in 2013 can test whether or not the transition to all-IP networks demands PSTN like interconnection mandates. The current absence of IP service interworking between the already IP enabled 20-30% of end points owes to the regulatory dispute. Creating the possibility of voluntary and commercial terms connecting all IP networks and spanning all IP end points represents the main purpose of a telecom detente. A "just do it" detente works better than "just trust us" arguments where no trust exists.

The detente and universal IP service interworking provides the only means of obtaining the benefits of IP provisioned services (IPS). Federating communication services between IP networks provides an application layer complement to IP data interconnection. It sustains the benefits of quality of service, device provisioning, and service provisioning across different networks. IP service interworking enables new communication services like HD voice and connecting end users via the greatest common denominator of device functionality. IPS replaces the contribution to return on invested capital lost with declining demand for plain-old-telephone-service.

There exists an entirely new means of maximizing the value of network infrastructure in the case of IP networks capable of supporting an arbitrary and expanding array of services. The strategy in the case of the PSTN involves expanding market share, scale efficiencies, and price. IP networks also benefit from the possibility of expanding capacity and addressable market. The capacity and addressable market connection in the case of networks offers the same dynamics and incentives as expanding compute capacity and addressable market. This sustainable source of growth makes maximizing the value of IP network infrastructure the same type of non-zero sum game as information technology. It makes the utility model a poor fit in the case of IP networks.

Distinctions between information and communication services fail as proxies for competitive and non-competitive in the context of all-IP networks. The indistinguishable nature of communication and information services in all-IP networks makes their separate regulatory regimes unsustainable. Attempts to preserve PSTN like regulations collide with the non-regulatory history of IP networks. IP interconnection already exists as a robust commercial ecosystem. The attempt to apply a government service interworking mandates to voice as an application of IP networks promises to create endless line drawing disputes. A 12 month detente creates the space for commercial and voluntary service interworking to emerge, or, alternatively, produce a clear record of market failure justifying government intervention.

After 100 years, there exists no uncertainty about the course of the power politics associated with government as arbiter in telecom disputes. Public interest questions around communication remain important after the transition, but information technology provides an existence proof for a private sector means to public interest benefits. It seems prudent to test the possibility IP networks create similar dynamics in communication. Internet protocol separates connectivity and application and forces network operator IP provisioned services to compete with over-the-top services. The network operator retains complete control over services in the case of circuit switching and the PSTN.

The notion of detente will seem unsatisfactory to anyone seeking reparations and accountability for past misdeeds, because the case for detente weighs the needs of the future over of the past. Telecom detente in 2013 shapes the course of communication in the current century as the Kingsbury Commitment did in 1913 for the 20th century. The underlying disputes between large and small networks seeking to preserve commercial self-determination and between telco's and end users seeking protections for the function of commmunication in personal self-determination reflect the same forces creating conflict across human history. These issues either diminish in the context of all-IP networks or they do not, but we cannot know as a matter of theory and conjecture. New Beginning 2013 reflects recognition disputes can become self perpetuating and need a hard reset from time to time.

Open Source Policy Versus the Last Telecom Monopolist by Daniel Berninger

The founding of the Voice Communication Exchange Committee (VCXC) offers a competitive alternative to the Federal Communication Commission (FCC) and the first example of a startup addressing policy questions. The decision to target the FCC reflects the government agency's status as the last monopolist on the telecom landscape and the failure of other means of policy reform. The number of companies regulated and the FCC's funding doubled since the arrival of the public Internet and VoIP in 1995. VCXC leverages the transition to all-IP networks to setup an end game for the telecom regulator as the 100th anniversary of the first government intervention into telecom arrives next year.

The FCC presides over a domestic telecom industry generating almost a trillion in revenue and employing over a million people. The relatively tiny FCC budget of $335 million and staff of 2000 indicates either striking efficiency or a worrisome concentration of power. The reality seems unlikely to be the former as there exists no company among the 6000+ obligated to file the FCC Form 499 or public interest advocate satisfied with the result. This type of performance usually makes a monopolist irresistible for entrepreneurs, but startups do not usually target government agencies. A plan for influencing government usually involves paying a registered lobbyist.

VCXC applies the same means of disrupting the FCC as Linus Torvalds applied in the case of the Microsoft operating system hegemony. Publish the starting point for a competitive alternative and issue an open invitation for incremental contributions. The open source process benefits from the energies of people and organizations seeking relief from an oppressive monopolist. Open source initiatives do not always succeed and may even rarely succeed, but they do tend to advance the cause of meritocracy. The collective impact of the open source movement transformed the software business, and VCXC seeks to test the approach on questions of governance.

The roots of telecom regulation in the US trace to an agreement between AT&T President Theordore Vail and President Woodrow Wilson as outlined in a December 19, 1913 letter from AT&T Vice President Nathan Kingsbury to the Attorney General. The agreement settled an antitrust complaint against AT&T and made America the exception as every other country in the world nationalized telephone networks. The Kingsbury Commitment represents the first example of a theme repeated over and over in the subsequent 100 years - government policy makers recognize the importance of communication as an input to economic and political power and the resulting policy interventions tend to prove counter productive.

The most successful communication policy also represents something of an embarrassment and further illustration of the benefits of non-regulation. The invention of the transistor at AT&T Bell Laboratories in 1947 and the awarding of a Nobel Prize did not prevent the Department of Justice from excluding the AT&T monopoly from pursuing information technology revenue in a 1956 Consent Decree. The FCC maintained a separation between the transistor driven communication and information technology industries through the Computer Inquiries in the 1960's, 70's, 80's and through the Telecom Act of 1996 as well as in rulings such as the Free World Dialup Decision in 2004.

The nascent information technology industry regulators sought to protect from the AT&T in 1956 now enjoys equivalent revenue, profits, and 4x the collective enterprise value of the still heavily regulated telecom industry. There exist no differences between the worlds of information and communication technology sufficient to account for the outcome aside from the relative benefits of regulation and non-regulation. The expansion of information technology includes a wholesale takeover of communication via the Internet and creates a dilemma for the FCC VCXC seeks to exploit. The transition to all-IP networks makes telecom and information technology indistinguishable.

VCXC takes advantage of FCC's failure to admit the limitations of regulation or recognize the obsolescence of distinctions between information and communication technology. As a practical matter, the transition to all-IP networks makes telecom an information technology. VCXC leverages the non-regulated status of information technology and private networks to give member network operators the opportunity to demonstrate the public interest benefits of a private non-regulated communication ecosystem. Communication policy remains as much a question of public interest today as in 1913. VCXC simply seeks to demonstrate non-regulation offers more public interest benefits than regulation.

The backward looking justifications of regulation injure both telecom and information technology companies. Communication and information technologies offer complementary means to the same end - knowledge. The means of making technology distinctions disappears with the transition to all-IP networks. The policy of starving telecom in order to allow information technology to flourish became counterproductive with the arrival of VoIP in 1995. Limitations on telecom companies slow investments in network infrastructure necessary for information sector growth. The information sector no longer prospers at the expense of the telecom sector but in tandem with the telecom sector.

The public interest energies favoring strict regulation of telco's remain undiminished in spite of changing conditions. These forces found a recent expression in blocking the acquisition of T-Mobile USA by AT&T, but bad policy injures the public interest no less than telephone company profits. The exclusive focus of policy on market share competition between telco's ignores the dominant source of information technology sector growth. Intel's investments sustaining Moore's Law predate AMD and owe to the benefits of new compute capacity in expanding addressable market. The same link between expanding networking capacity and addressable market exists in the case of telecom.

The benefits of leaving all-IP telco's beyond the reach of the FCC needs to show up in the communication services offered by member companies. The success or failure of open sourcing policy turns on the public interest benefits of moving communication from a regulated public telephone network to unregulated private networks. Both the FCC and VCXC rely on the rule of law, but VCXC allows companies to opt-in to a policy of their own design. The urgency of competition shaping FCC decisions in recent years applies to the FCC itself. To paraphrase a quote attributed to Margaret Mead, never doubt a startup can change the world. Indeed, it is the only that ever has.

ICT Policy Parity by Daniel Berninger

The assertion of separate policy regimes to information and communication technology (ICT) represents a 20th century public policy success story. The 1956 Consent Decree built a "Berlin Wall" between the two industries by excluding AT&T from pursuing information technology revenue. The FCC Computer Inquiries in the 1960's, 70's, and 80's worked out by trial and error the information versus telecom service dichotomy. The transition to all-IP networks illustrates the success of the policy and makes reunification and ICT policy parity the imperative in the 21st century. The eventual need to end unequal treatment of information and communication technology became obvious as soon as Vocaltec made Internet voice an option in 1995.

The need for ICT policy parity reflects the same "black box" test motivating the original assertion of separate policy regimes. The value proposition of the information black box continues to expand at a rapid pace without regulatory intervention. The transition to all-IP networks puts the same forces to work in the case of the communication black box. The question of finding policy means does not even arise to the extent the policy outcome obtains without intervention. The challenge and controversy in the case of ICT policy parity arises from the need to unwind legacy regulations as the means of regulation tends to take on a life of its own. Preserving the old means nonetheless now threatens the end purpose of communication policy.

Changes in technology do not alter the purposes of public policy, but they do effect the means and the extent of the need for interventions. The nature of Internet protocol separates service (aka application) and networking. This one fact accounts for the differences between the pace of innovation associated with IP and TDM networks. The accumulation of market power by AT&T in the 20th century relied on the integration of service and networking. PSTN voice remained both unimproved and the only communication option aside from writing a letter for the entirety of the 20th century. The arrival of the commercial Internet and VoIP in 1995 as well as the transition to all-IP networks starting in 2005 makes ICT policy distinctions unnecessary and unsustainable.

The founders of America viewed the cause of self-determination a core to their mission. The resulting model of governance asserts rules only to the extent conflicts arise in the unrestricted pursue of self-determination by individuals. In context of ICT, notions of abundance and scarcity drive public policy, because information and communication remain key inputs to economic and social outcomes. Policy makers do not concern themselves with abundance and scarcity of toasters or shampoo. The merits ICT policy parity turns on whether "I" and "C" business models threaten scarcity or promise abundance. Telecom regulation arose to defend the right of self-determination by end users from the rent seeking ambitions of telephone companies.

End user time and attention survive as the only relevant scarcities in all-IP networks. The near zero switching costs between IP enabled services and the ability of end users weigh the value proposition of all communication options against each other creates a communication free-for-all. Substituting one service for another represents the new normal. Email and telephone calls offer entirely different modes of communication, but email substitutes for telephone calls extremely well in many contexts. The all-IP network gives end users the power to ignore historical market distinctions by geography (local, LATA, intrastate, interstate, international), service type (voice, text, video), access mode (copper, coax, fiber, licensed and unlicensed wireless), vertical market (consumer or enterprise), and even notions of real-time or non-real-time.

The disconnect between connectivity and the software innovation driven application layer alters the the risks and rewards of rent seeking enabled by market power at the network layer. End user willingness to pay reflects the value proposition generated by the communication free-for-all. The addressable market of the application layer reflects the price, performance, and capacity of IP connectivity, but connectivity holds no inherent value for end users. This turns communications into a non-zero sum game where rent seeking on the part of network owners shrinks the addressable market along with demand and willingness to pay. A strategy of regular network upgrades creates a virtuous cycle expanding the addressable market, and, by extension, the value of network assets.

The example of regular network upgrades and ever more compelling attached devices in the case of wireless illustrates this virtuous cycle. The all-IP network and steady reductions in the cost of moving bits gives the telecom industry the same growth opportunity as the information processing sector. The ability of over-the-top offers to address several billion end users associated with global IP networks limits the leverage of even the operators of the largest networks. Policy regimes considering only zero sum market share contests miss the type of non-zero sum forces driving Moore's Law and the growth of the information technology sector.

All-IP networks offer 10x operational expense benefits and provide the means to implement new services like HD voice. Absent regulatory distortions, disincentives, and the resulting litigation, the transition to all-IP networks can produce an overhaul of communication networks by 2018. This does not require network operators to give up pursuing scarcity and rent seeking dreams. It means withholding interventions absent evidence of success - increasing price without improving the value proposition. Experiments with discrimination against wireless over-the-top services did not slow the growth of an increasingly compelling list of communication alternatives. Policy makers do not need to defend the communication sector against dumb business models.

The ability of countries to achieve ICT policy parity will determine the communication and economic winners and losers in the 21st century. Policy parity does not necessarily mean wholesale adoption of the information technology like non-regulation. The most prominent proposals under consideration by ITU member countries at WCIT in December favor applying telecom like regulation to the Internet. America can not dictate the outcome at the ITU, but American policy makers can offer a model for implementing ICT policy parity. The forces in play in 2013 are similar to the conditions in 1913 when the Kingsbury Commitment made America the exception as countries nationalized telephone companies.

The impact of IP networks on everyday life increasingly makes interventions more a question of control than communication in many countries. Decisions to nationalize telephone networks in the 20th century and assert national control over IP networks today reflect a recognition of the transformative power of communications. This track record of attempts to control communication looks problematic in two dimensions. Top down controls over communication in North Korea and Cuba survive at an enormous economic cost. This leaves these countries and others with more sophisticated controls like China vulnerable to political instability. The potential of a Moores Law driven communication renaissance exists only in those countries willing to let communication flourish.

The information and communication industries become indistinguishable in the context of cloud computing and all-IP networks. ICT policy parity makes competition a function of customer acquisition, customer retention, and a vigorous pace of innovation. The frictionless nature of global IP networks makes retaining differences between information and communication unnecessary. There exist issues with communication abundance as no technology offers uniformly positive outcomes. The communicating public needs to decide whether the resulting interventions represent attempts to reassert government control or facilitate communication. The controversies generated by the questions of governance under consideration by the ITU reflects the fact decisions about ICT policy parity will determine the future of the Internet and drive geopolitics in the 21st century.

The Miracle of the Non-Commons in ICT by Daniel Berninger

Great power imposes great responsibility. Voltaire, 1772

Power tends to corrupt and absolute power corrupts absolutely. Lord Acton, 1887

The incoherence of the "I" and "C" policy environments ICT companies navigate reflects a conflict between the miracle of the non-commons driving information technology and a 1930's view of communication scarcity. Pollution or other costs externalized by corporations generate headlines, but the externalized benefits underlying the growth of the information technology sector persists with little notice. The return on capital necessary to justify Intel's investments sustaining Moore's Law come from the sale of processors to OEM's, but this economic stewardship produces a miracle of the non-commons lifting an entire value chain of companies. Stubborn loyalty to scarcity assumptions undermine an equivalent virtuous cycle in telecom.

The failure to reconcile the theories of information and communication cripples the growth these fully integrated and co-dependent industries. It prevents the formation of a grand info-telecom virtuous cycle with the potential to accelerate the economic contributions of the four trillion dollar ICT industry as well as generate productivity gains lifting the entire $60+ trillion dollar global economy. Progress in communication and information technologies trace to the same inventions of the transistor and computing in the late 1940's. The AT&T Consent Decree separated the sectors shortly thereafter in 1956 by excluding the AT&T monopoly from entering the market for information technologies and pushing the transistor into the public domain.

The reintegration of communication and information technologies in the form of IP networks owes to forces set in motion in 1968. The quadruplet events in the same year - FCC MCI and Caterfone decisions, founding of Intel, and the ARPA IMP contract for the precursor Internet - made the reunion of information and telecom inevitable. The MCI decision led to the AT&T breakup in 1984. Carterfone made device innovation possible. Intel's stewardship of Moore's Law drives infotech industry growth. This miracle of the non-commons continues to move ICT into adjacent markets and create new markets. Cloud computing and IP networks end any hope of preserving policy distinctions between information and communication sectors.

The dysfunctional policy environment owes to an obsolete view of information and communication as the mutually exclusive products of two separate networks. Information and communication sectors rely on the same IP networks and always offered complementary means to the same end - the accumulation of knowledge. Information provides a self-help route to knowledge. Communication refers to the contexts individuals help each other accumulate knowledge via a monologue or dialogue. A student might accumulate knowledge by reading a book as information or attending a lecture where a professor communicates the same information. Humans fully integrate information and communication modes as circumstances demand and any policy distinctions require problematic fictions.

Policy makers face a binary choice - grant telco's the commercial self determination enjoyed by information technology companies or bring information technology into the regulatory regime applied to telecom. A move to all-IP networks starting in 2005 gives telecom companies the same opportunity to pursue economic stewardship as their siblings in information technology. The miracle of the non-commons already exists in the beneficial externalities associated with investments in broadband networks since 1995. The resulting communication free-for-all already obsoletes the assumptions underlying The Communication Act of 1934 and its revisions.

Consider the differences between the telephone company value proposition in 1995 and today. Long distance charges accumulating at the rate of $0.25 per minute in 1995 no longer exist. International calling costs a small fraction what it did in 1995. Always on $50 per month 10Mbs broadband connections replace accessing the Internet with a 28.8Kbs dial-up modem. Telecom offers already reflect the 100 fold per decade improvement associated with the miracle of the non-commons in information technology. Bickering suggests the communicating public, regulators, telco's, and, even, infotech executives remain unaware of the new narrative.

The assertion of separate policy regimes for information technology and telecom becomes severely counterproductive in the context of all-IP networks. Top down regulation of telecom in the US and the rest of the world nonetheless holds on to the presumption of monopoly or zero sum market share competition as the only relevant market dynamics. The arrival of the commercial Internet and IP voice exposed telecom to competition from information technology after 1995. IP infrastructure already dominates core telco networks and will (contingent on regulatory obstacles) displace circuit switching before the end of the decade.

AT&T and Intel end up with exactly the same incentives for investment in network and compute capacity. IP networks do not support the type of scarcity business models associated with the PSTN even accepting capital intensity and right-of-way makes market share competition very difficult to sustain. The capacity of IP networking equipment benefits from the same transistor density improvements driving Moore's Law in computing. The decoupling of transport and application layers in internet protocol allows this capacity to support any and all services. Expanding capacity and by extension the addressable market for the entire ecosystem offers the same miracle of the non-commons in telecom as expanding compute capacity in infotech.

Expanding capacity through an upgrade of networking equipment can follow a three to five year cycle even as the return on outside plant (e.g. fiber, coax, copper, cell towers) remains spread over decades. Investors presently award information technology companies four times the enterprise value to revenue multiple of telecom companies. The necessary conditions exist for this differential to disappear to the extent policy makers allow network operators to embrace the miracle of the non-commons. The scarcity business models triggering a regulatory response no longer serve the best interests of shareholders. The economic stewardship business provides the only sustainable source of growth investors covet.

The upset with telephone companies reflects the nature of communication as key input to social and economic life as well as the belief telephone companies prefer hostages to customers. At this point, the extent of options available to the communicating public turns telco attempts at scarcity into self-injury. Telecom regulation represents a means to an end, not received wisdom chiseled on a stone tablet. The fate of telecom regulations needs to reflect the best outcome for end users otherwise known as the public interest. Regulators need to acknowledge complicity in the causes of the exodus of customers from the PSTN and remove obstacles to creation of all-IP telco's realizing the miracle of the non-commons in telecom. Link to Older Blog Posts

big_promo

Global Voice Communication Exchange

VCXC Objective

Transition global telecom industry to all-IP networks and upgrade the universal core voice service to HD voice by June 15, 2018.