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Thirty years ago, Americans had plain old telephone service (POTS). In each community, one local telephone company offered a voice connection, referred to as “dial tone.” These rotary dials were considered a great improvement over the live operator who controlled a switchboard and personally connected each call. There was no Internet; there were no cellphones; and TV came from an antenna on the roof or rabbit ears on top of the set. That was the communications landscape of the time, and, my, what changes the last three decades have brought!
By the early 1990s, emerging competition in the long-distance telephone market and the desire to create competition in local telephone and cable TV services led Congress to engage in a multiyear exercise to overhaul the nation’s communications laws. This effort culminated in the passage of the Telecommunications Act of 1996. Feb. 8 marked the 17th anniversary of that law, which prompts me to reflect on today’s accelerating evolution in communications technology and the policy challenges these dramatic changes present.
The 1996 act focused on POTS. We wrote new rules to foster competition in both the local and long-distance telephone market. While we took steps to bring about greater competition in the local, multichannel television market, we hardly focused on the Internet. In fact, the Internet was only mentioned in one section of the act, which was later declared unconstitutional by the Supreme Court.
In other words, the 1996 act was designed for a world that is rapidly disappearing. Today’s consumers benefit from decades of innovation in telecommunications equipment and services.
The Internet is now pervasive, and broadband reaches all but the most remote places. Nine out of 10 American consumers can choose from five or more wireless providers. Packages of voice, video and data are offered to consumers by both wired and wireless providers who compete with each other on price, quality and the variety of service offerings. Cable, satellite, wired and wireless phone companies are engaged in furious cross-platform competition, giving consumers choices that were unimaginable 17 years ago.
Against this dynamic background, some clear and accelerating trends have emerged. For example, POTS is vanishing and voice service is transforming as we speak. Most consumers have now “cut the cord” to their telephone company wire-line service.
Approximately 25 percent of homes now subscribe to the phone service offered by their traditional local telephone company over that network. Indeed, communications traffic of all kinds is rapidly moving from the public switched telephone network to Internet Protocol-based networks.
Despite this, telephone companies are still required to maintain PSTN coverage to 100 percent of homes, effectively siphoning investment away from the faster and more capable networks that customers have demonstrated they prefer. No other broadband competitors are saddled with this regulatory obligation, and many are investing in high-speed broadband networks at a significant pace.
Against this backdrop, the Federal Communications Commission recently announced in the National Broadband Plan that the greatest telecommunications infrastructure challenge of this decade will be the transition from the old PSTN to IP networks. The FCC’s Technical Advisory Council went on to recommend that the PSTN sunset by 2018, after which voice, video and data will travel exclusively on IP networks.