A Consumer Perspective on Bandwidth, Network Congestion, Network Architecture and Regulatory Reform

Presentation to


James Love, Director
Consumer Project on Technology

Washington, DC
February 22, 1997


My name is James Love. I am the Director of the Consumer Project on Technology (CPT), an organization started by Ralph Nader in 1995. On the Internet we can be found at http://www.cptech.org. Over the past two years, CPT has been engaged in a number of matters involving telecommunications, intellectual property rights, privacy, and consumer protection. I am here today to give a consumers perspective on regulatory matters that pertain to residential connections to the Internet.

In our view, the Internet is the most exciting and important development in communications of our generation. It represents a most profound change in the citizen's role as a publisher and participant in the modern information age. The relatively low quality of multimedia productions which can currently be delivered over the Internet is compensated many times over by the vast richness of the information accessible through the Internet, and the far lower barriers to entry for publishers. The rapid growth and excitement associated with the Internet is evidence that the public recognizes and appreciates the benefits of an open platform for communications, where each participant has multiple identities as a consumer, producer, citizen and neighbor. Regulators should protect and enhance the development of this important approach.

There are several areas where regulators can do a better job to protect and facilitate the development of the Internet.

  1. Residential consumers need higher bandwidth connections to the Internet, and they need it now, at affordable prices.
  2. Regulatory regimes should facilitate the development of home 24x7 connections to the Internet.
  3. Regulators need to protect Internet Service Providers and other Enhanced Services Providers from anticompetitive practices by the ILECs.
  4. Regulators need to make more economic information public to facilitate a broader debate on important economic regulation issues.

Developments in Network Technology and the Related issue of Network Congestion

What Works Now?

On January 23, 1997, the FCC held a forum on "available bandwidth." The forum focused on the problem of increasing bandwidth for the residential market. The FCC brought together a number of experts from the telephone, cable, wireless and computer industries, as well as from consumer interests. As expected, there were speculations about future wireless services, and talk of experiments and limited trials of cable modems and high bandwidth xDSL applications, such as ADSL, which are delivered over the copper wire infrastructure. There was also some brief discussion of older more mature technologies such as ISDN, which has long been deployed for business voice services.

This FCC forum was not another trade show hype festival, however. There was sobering news. Cable modems and ADSL are not likely to be deployed in large numbers for several years, and wireless technologies will likely be a niche application as well. This isn't to say that cable modems, ADSL or other applications won't be deployed at all over the next five years. They will. Consumers in some communities have good choices. But the majority of the population will live in markets that will only be served by analog modems or ISDN.

Residential ISDN, the digital technology that is much better than analog modem technologies, suffers from an immense image problem. It gets a tiny fraction of the press coverage of the new 56 k modems, for example, despite the fact that two 56 k modems bonded together will use twice the local loop resources than BRI ISDN, operate slower, and have less upstream bandwidth. ISDN is considered an "old" or "dead end" technology. Even though it is far better than anything else that is now available, ISDN lacks the sizzle of a newly developed product, or any visible marketing enthusiasm from the major ILECs.

ISDN also lacks champions among regulators. Reed Hundt, the Chair of the FCC, has called for the deregulation of residential ISDN prices, which he says are used only by a few higher-income consumers. That's exactly what Bell Atlantic is saying. We are expected to wait until competition develops for local telephone service, and new entrants lease the local loop and offer us something better than POTS for Internet connections. Some of us think that regulators are making a big mistake by abandoning the short term, and by not having a "Plan B" for those consumers who will not soon benefit from local competition. We are impatient. Low cost residential ISDN could have been deployed as a mass market service 3 years ago. Japan and many EU countries are moving ahead with ISDN deployment. There is no reason why regulators should not force the ILECs to deploy it now on an affordable basis.

There is a sense that ISDN isn't a good choice, because it is a transition technology. Higher bandwidth alternatives such as ADSL are better, people are saying, even though they can't be deployed today at prices that consumers can afford. I often hear people say that we should be moving away from a circuit switched technology, like ISDN, to something that is packet switched. I'll discuss this below. But much of this is besides the point. When something better comes along, people will migrate to the better technology, when the price is right. I began computing with a 300 baud modem. Like others, I have moved to 1,200 baud, 2,400 baud, 14.4 kbps and 28.8 kbps modems. I was rarely the first person to make the move, but when the price was right, and the new higher bandwidth applications were compelling, I made the investment and moved up.

If we were still using 2,400 baud modems, because we wanted to wait for ADSL or cable modems, we would all be using Lynx to cruise the Web. Netscape, a software application, just wouldn't work. Their would be no real audio, and no lots of other things. There are real costs to waiting for more bandwidth. The development of many new applications that need the bandwidth is deterred. We think this is a big deal.

ISDN Costs and Prices

The major barrier to deployment of ISDN, the here and now digital technology, is the high consumer price. The technology isn't expensive for the ILEC. How do we know that? Lets consider the following.
  1. ILECs have deployed ISDN as a voice service for years, at prices competitive with POTS. Bell Atlantic and other firms used ISDN to provide business voice services that would compete with feature rich PBX services.
  2. In Japan and many EU countries, residential ISDN is priced relatively close to POTS prices. I was in Japan in August of 1996. The monthly price of a POTS line was 2,830 Yen, and the ISDN line was priced at 3,500 Yen per month, a difference of 670 Yen, or roughly $5.40 per month. NTT distributes literature which provides the names and contact information of ISPs providing ISDN connections to the Internet. NTT officials told me in August they wanted to double the number of ISDN lines by the end of 1996.
  3. Several ILECs have reported in FCC proceedings that Non- Traffic Sensitive costs of ISDN are $1.18 to $6.31 higher than POTS . (See http://www.cptech.org/isdn/nj-direct-love.html)
  4. In some ISDN Centrex rate proceedings, ILECS have reportedly estimated usage costs at less than $1 per month.
  5. Some smaller LECs have priced ISDN much closer to POTS. In Arkansas, Scott Sander's NATCO offers residential ISDN for a flat rate of $17.90 per month, about $7 per month higher than the price for POTS. Dr. Sanders says the $7 price differential more than covers his costs.

In contrast to the early aggressive prices of ISDN as a business voice service, many ILECs are now seeking sky high prices for ISDN as a data service. NYNEX, Bell Atlantic, US West, and PacBell want usage charges anywhere from $1.20 to $3.60 per hour for a 128 kbps connection. The "best" ILEC tariffs for residential ISDN are about 2x the POTS rates, while the worst ones can run hundreds of dollars per month. (See: http://www.cptech.org/isdn/isdn.html).

Network Congestion, Usage Fees, and Network Architecture

The ILECs are engaged in a massive public relations effort to persuade the public and regulators that we are facing a huge problem from congestion on the Public Switched Telephone Network (PSTN). These assertions seem plausible, but don't hold up to much examination. Network congestion on the Internet (as opposed to the PSTN) is a real problem. But it is a hard topic to grasp. What congestion are we talking about? The difficulty in connecting to American Online, Erol's or your favorite ISP? The difficulty in transferring files from a popular ftp or Web site? The "crunch" that seems to occur around 5 pm EST, when California is getting back from lunch? These are all different problems, which require different solutions.

The alleged problems on the PSTN are also easy to confuse. PacBell seems to be saying residential dial-in users are causing a huge problem when they originate a call. Bell Atlantic implies the same thing, but is actually saying something quite different -- that ISPs themselves have busy telephone lines, which creates problems in terminating calls.

The alleged problems in originating calls is one that appears to be untrue today, even with the existing network architecture. People who use the Internet may make longer calls, and may even call more minutes per day than do voice callers, but the data calling load is distributed differently the voice call load. This is good news, since congestion only occurs on the PSTN when too many people try to call at the same time.

The most compelling data concerns the constraints on the ISP side. Most residential dial-in services have 10 to 20 customers per incoming line. That means that only 5 to 10 percent of their customers can use the network at any given time. The residential voice network is built out for a 7:1 ratio, or about 14 percent. Based upon these statistics alone it is hard to see how dial-in callers to ISPs are presenting a problem today for the PSTN.

America Online got in trouble when it advertised a flat rate service before it could accommodate the predictable increase in usage. AOL had 40 subscribers for each incoming line, or about half the minimum, according to industry standards. What AOL did was indefensible, from the standpoint of under investment in its own facilities. But AOL didn't cause problems for the PSTN. More than 97 percent of the AOL customers were not connected to the network.

Calls to the ISP present a different set of issues. It is not surprising that the ISP phones are often in use. That's what they are for - to receive calls from the ISP's paying customers. Why purchase lines that aren't needed, unless you enjoy shipping extra money to the telephone company? The ILECs want the ISPs to pay for incoming calls. But these calls are already paid for by the callers, under our sender pays system. We could change that, but before we increase the ISPs phone bill, we would have to think about lowering the caller's bill, or else the ILECs would be getting paid twice for calls. And how would we charge for ISP usage? By using average cost models for usage based upon voice traffic? By charging ISPs by the minute to receive dial-in calls in off- peak hours? This isn't something to do just for fun.

The Internet Access Coalition and BBN's Fred Goldstein have described a number of steps the ILECs can take to address some of the problems they have serving ISPs in the few central offices where congestion problems have been identified. These are relative simple things the ILECs need to do for better load management. The sky isn't falling, at least not now.

New Network Architecture

Ultimately, however, we need to make the PSTN into something that has the letter D, for data. Fortunately, there are already some known technologies that can do this. Nortel and Lucent are now marketing devices that can take data calls off the central office switches and circuit trunks, and transport the call to the ISP using a packet switched network. This is "here and now" technology. Also, NYNEX is now showing off a new technology called "Always On/Dynamic ISDN", which BBN's Fred Goldstein calls a means to providing full-period connectivity without nailing up B channels.

The approach being marketed by Nortel, Lucent and others works with POTS or ISDN calls. Some ILECs are offering this at prices which are now competitive with the costs of maintaining POTS line with modems. Bell Atlantic and PacBell are asking regulators to impose new fees on ISPs who use the circuit switched network, so that they will have an incentives to move to the newer packet switched transport. We have a different idea. We think the ILECs should provide a carrot, rather than a stick. They should price ISDN or other digital services very cheaply, so long as the transport takes place over the packet network. The ISPs would have an incentive to pay more for the packet switched transport, if their customers could then get an affordable flat rate digital line. Based upon the minuscule deployment of ISDN today, this could be a win-win solution.

The "Always On/Dynamic ISDN" would permit a user to maintain an open connection with the lower speed packet switched digital D channel, while ISDN B channels would pop up on an as needed basis for larger file transfers. Like frame relay, it would permit users to share network resources. If the ILECs would price the service reasonably, it would have a ready market.

Regulators have to decide, do we want these services to be made available now for an affordable price? Or will we let the local monopoly ILEC to price these services very high until (and if) local competition arrives? This is a choice we have been facing for the past several years, and the vast majority of Internet users are still stuck with POTS lines.

Regulatory Strategies

We would like regulators to set goals. What percentage of residential lines should be something better than POTS over the next five years? How are regulators going to push the ILECs to get the job done? Here are some of our suggestions.

  1. Push hard for flat rate unbundling of the local loop. Don't permit the ILEC to get usage charges for the local loop.
  2. Don't assume that usage based pricing eliminates congestion. Usage based pricing discourages use. But it does also discourages use during off-peak hours (a bad thing), and will take the pressure off the ILEC to innovate. Usage will become the profit center, and why would the ILEC want to support deployment of new technologies that eliminate usage fees?
  3. Adopt new access fee structures that will be friendly to data, and which will make 24x7 connections to the home affordable.
  4. Use economic incentives to speed the deployment of digital lines. Change the ILEC incentives, by making rate of return, contributions to high cost fund, or something else that matters, on the basis of the ILECs comparable success in deploying digital lines. I would suggest the following metric.

    d = the percent of residential lines in the ILEC service area. This would include any better than POTS technology, such as ISDN or xDSL, delivered by the ILEC or one of its competitors.

    D = the average percentage deployment of residential digital lines for all LECs.

    RS = relative success, as measured by d/D, the ratio of the ILEC's deployment to the average deployment for all LECs.

    If something important, anything important, depended upon RS, then ILECs would find ways to deploy digital lines to residential subscribers.

  5. Make ISDN a basic service, and regulate its price in markets where there is no local competition. ISDN is a mature service. Business voice service delivered over ISDN has been regulated for years. Residential consumers have already contributed to the building of the new digital infrastructure which enables ISDN to service the business market.
  6. Recognize that the United States' flat rate local calling structure is an important reason why the United States leads the world in the Internet usage, and the development of Internet content and services. Other countries are trying to find ways to introduce flat rate pricing for the residential market. Japan is slowing moving in this direction, with off-peak flat rate plans, to two data telephone numbers. The new Japanese flat rate effort, which should be expanded in that country, applies to POTS and ISDN calls.

    Internet Resources

    CPT's home page: http://www.cptech.org
    ISDN page: http://www.cptech.org/isdn/isdn.html
    Access Charge Reform Page: http://www.cptech.org/afr/afr.html
    Telcom Page: http://www.cptech.org/telecom/telecom.html
    Archives of CPT newsletter:: http://www.essential.org/listproc/info-policy-notes/
    Archives of ISDN discussion list: http://www.essential.org/listproc/isdn/
    This page has been accessed times since March 3, 1997.