Fundamental changes to telecom regulations needed if Internet to succeed

The CRTC should adopt a new regulatory regime for telecom that reflects the technical realities of the Internet rather than the "obsolete design philosophies" of legacy networks, according to a new report by consultants Timothy Denton and François Ménard. The 31-page paper is promoting an idea that is gaining widespread acceptance among engineers who see next generation networks more focussed on software protocols than underlying hardware facilities. And with this transition, the paper notes, comes a need for regulators to promote packet-based networks that are oblivious to the types of bits they carry. "The rules for the provisioning of basic telephony service have been well established by the decisions regarding CLECs," states the June 15 paper, A Paradigm Shift for the Stupid Network. "The new challenge is to accommodate the forthcoming migration of conventional circuit-switched telephony and cable television applications onto a high-speed Internet access infrastructure." The authors propose three principles for regulation in the Internet era: facilities-less competition, equal access for packets and minding the protocol stack. "Failure to follow these precepts in an Internet era would be fatal to competition," they maintain. Despite the CRTC’s focus on facilities-based competition, the report contends that its call for facilities-less competition is a means to the same end. "Facilities-less competition means that whenever there is a choice to use less or fewer facilities to enable equally effective competition, the bias shall be towards any outcome which results in less or fewer facilities," states the report, a copy of which was provided to the CRTC a few weeks ago. The paper goes onto say that telecommunications policy should not try to induce investments in "needless infrastructure". The authors also argue that equal access to packets is a logical extension of facilities-less competition, and that regulators must turn their attention to "minding the protocol stack". These recommendations get into the nuts and bolts of how interconnection and tariffs are structured and threaten the fundamental underpinnings of the telcos’ market power. The report uses the analogy of railways and highways to differentiate between legacy and Internet networks. Just as the owner of a railway owns the cars or has an agreement with similar companies, a telco controls its own traffic or enters into deals with other firms. But the Internet has few restrictions and nearly universal access. Just as road traffic has overtaken rails, electronic traffic could easily surpass voice. "It is sufficient to state that the operators of legacy networks understand this fact about the Internet," the paper states. "They see that the value proposition of the Internet strips away their traditional money-making abilities, and they wish to limit the abilities of the Internet by making it conform to the business models they have inherited, which are highly profitable." Interconnection rules are basic to how competition evolves. Telecom policies focus on facilities interconnection at the physical layer. The authors say this focus must shift to the software layer. "The principle of equal access to packets requires that regulators and the industry must be concerned with interconnection through software," they write, "which occurs at a higher layer than the physical apparatus of connection and transmission." The report says the rules favour incumbents, which are allowed to force competitors to accept a certain type of network-layer interconnection. "The limitations or design of the network layer interconnections have an enormous impact on what gets designed, produced and sold in the new era," the paper states. "Redefining network interfaces redefines markets and services, redefines winners and loses, abolishes or reinforces monopolies. It is that important."

Fundamental changes to telecom regulations needed if Internet to succeed

News | July 16, 2000

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