Thursday, June 25, 2015

When to Shut Down the PSTN Remains an Issue

The fixed network communications industry has yet to accomplish a key transition mobile service providers already have learned how to finesse, namely the challenge of decommissioning an out-of-date network with a next-generation replacement.

Among the chief problems are the “carrier of last resort” and universal service obligations imposed on some former monopoly providers. At some point, the legacy network must be completely shut off, and all customers migrated to the next-generation network.

But how to do so, and when to do so, remain contentious. Some policy advocates, for example, demand full legacy network coverage even as the next-generation network gradually is built.

But there is a fundamental economic problem. At some point, with dwindling numbers of customers on the legacy network, it becomes uneconomic to keep operating the legacy network.

At that point, economics matters: a network that cannot sustain itself cannot provide any service, to say nothing of universal service.

So the timing of any shutdown of the old public switched telephone network is one important issue. As any knowledgeable observer would attest, fixed network operators are anything but oblivious to the inevitability of the change.

That is one reason less capital, and fewer human resources, are allocated to maintaining the legacy network. But stranded assets are key. At some point, there will be so few remaining customers on the legacy network that it no longer makes sense to operate it.

In a sense, that is one reason why Sprint has asked the U.S. Federal Communications Commission to allow it to shutter the long distance voice network  it operates.

It is likely that the cost of running and marketing services on that network exceed revenues. In other words, the Sprint long distance voice business is unsustainable.

That eventually is a problem to be faced by virtually all fixed network telcos.

The problem then are rules and timetables that allow complete decommissioning of the older network, and interim steps that encourage rapid investment in the replacement network, while allowing service providers to more rapidly do what they must do, namely shift customers to the sustainable networks.

So it is that BT is calling on Ofcom to let it scrap the traditional telephone network, while also loosening regulations in the interim.

“We believe obsolete regulation should be rolled back, rather than clinging on until the last user dies,” said Mark Shurmer, BT’s group director of regulatory affairs. That is hyperbole, but understated.

In fact, the breaking point will come much sooner, at the point where revenue earned from the legacy network does not support sustainable and profitable operations.

It’s a tough issue, with heavy political implications. But it is undeniable that sustainability matters. Before the point where the legacy network becomes literally unsustainable, regulators and service providers must have made clear plans to decommission the olde network, and move all customers to the replacement network.

It will not make economic sense to support both legacy and replacement networks simultaneously.

No comments:

When Better Broadband Might Not Help

The Wisconsin Economic Development Corporation, in detailing the impact of the Covid-19 pandemic on various sectors of the Wisconsin economy...