Texas SB 5 & Intrastate Access Charges – What changes

October 3, 2013
10:00 am – 1:00 pm
 10:00 am – TEXALTEL Annual Membership Meeting – Board
 Board Elections: All officers and two directors –at -large.
 10:15 am – 1:00 pm TEXALTEL’s 2013 Business & Regulatory
FCC – Proceedings at the FCC that impacts present and future connectivity
Presenter: Jerry James, CEO, CompTel
Where is IP Interconnection & Copper Retirement?
Presenter: Tiki Gaugler, Senior Attorney, XO
Wholesale Last Mile Fiber Access
Presenter: Jason Wakefield, Member, Herrera & Boyle
Universal Service Funding: FCC Push to Service Specific Model and Texas Takes up Needs
Test Requirement
Presenter: Charles Land, TEXALTEL
October 3, 2013
Present Officers & Board Members
 Howard Siegel, Logix – President*
 Jared Benson – Vice President*
 Katherine Mudge, MegaPath– Secretary*
 Patti Hogue, Alpheus – Treasurer*
 Dale Schneberger, Grande – Director*
 Matt Edmuston, Meriplex – Director
 Nancy Lubamersky, TelePacific – Director
 Robert McCausland, Hypercube – Director
 Steve Savens, Bestline – Director*
*Seat up for election
Nomination and Voting Rules
 Nominations have been made: All seated board
members have been nominated for re-election.
 Additional nominations may be made at the time of the
 Each member company is asked to decide which person is
to cast votes for that company. One representative for each
company will be asked to provide a voice vote for the
The Leading Industry Association Representing
Competitive Communications Service Providers
and their Supplier Partners
Hill focus
 FCC Oversight hearings
 Spectrum auction
 Processes/procedures/merger conditions
 Senate wireline hearing
 Confirmation of FCC nominees
 Legislation – Cybersecurity/Privacy
FCC Leadership Transition
 Tom Wheeler as new FCC Chairman
New Staff
 Michael O’Rielly as new Commissioner (R)
 Interim Chairwoman Clyburn
 Timing
Top Issues
 IP Interconnection - VIOP trials/ Numbering
 Last Mile – Copper retirement/packetized loop
and Special Access Reform
 Network deployment issues
 Money - USF /CAF/E-rate/spectrum
Special Access Data Request
 Clarification/Modification to Mandatory special access
data request released on 9/17/13
 OMB approval required; Date for filing data TBD
 Clarifies Scope of Data Collection, e.g.,:
 List specific exclusions from definition of “purchaser”
 Clarifies that only applies to price cap areas during relevant
time period
 All relevant Form 477 filers must file even if just to certify that
they are not a “purchaser,” “provider” or “Best Efforts Business
Broadband Internet Access Service Provider”
 Provides submitting instructions and record format
 Modifies and amends questions and definitions contained
in the collection
USF Reform Phase 2
 Who pays?
 Who is eligible for the money?
 What qualifies for approved uses of the money?
 What is the potential impact on competitive
VOIP Numbering Trial
 What has been proposed?
 OTT providers to have direct access to numbers.
 Our Concerns
 Certificated carriers have pro-consumer and pro –
competition obligations
 OTT providers do not have the same requirements
 Network design issues for call handling
 Impact on other issues – IP ICAs
 Regulatory jurisdiction for OTT VOIP
 All agree there is a problem.
 All agree to work to protect their network and
their customers.
 It is not a “one-size” fits all solution.
 Liability?
 Costs?
 Privacy issues?
 What should you be doing?
Rural Call Completion
 Order requires carrier to retain call records to
calculate per cent call completion. Burden on the
 Prohibits carrier from providing ringback until
the call is terminated.
 Safe harbor if use 2 or less intermediate carriers
 Complaints may lead to FCC action.
 Key issues which need to be considered:
 Why are calls not completing? ILEC, 3rd party, other?
Spectrum Auction
 When? 2014
 What? AWS-3 Band
 Who? Managed bid process
 Where? Cellular Market Areas (CMA) versus
Economic Areas (EA)
 Impact Competition/Consumers/Coverage
Network Deployment Issues
 Pole attachments- access and rates
 Right a ways
 Building access
State Legislation Watch
 About 25 states have passed legislation
 Deregulate retail offerings
 No Carrier of Last Resort obligation
 No jurisdiction under state law for VOIP
 California status
 Michigan
 Stakeholder alliances
Tiki Gaugler
Senior Attorney,
About xo communications
 One of the nation’s largest providers of innovative
broadband and other competitive services
 XO has deployed IP technology into its nationwide
network and began offering VoIP services to retail
customers over a decade ago
 XO’s VoIP nationwide footprint covers 2,700 cities across
the U.S. and in nearly every state
 XO offers converged IP voice and data communications
services over a single access facility, including local and
long distance calling, dedicated Internet access, and web
hosting, as well as virtual private networking
Technology overview
 Time Division Multiplexing (TDM)
 Signals transmitted over dedicated connection
established for duration of call
 Utilizes circuit-switched network with fixed number of
channels and constant bandwidth per channel
 Internet Protocol (TCP/IP)
 Data grouped into packets, regardless of content, type,
or structure, that are individually transmitted on shared
connection then reassembled at destination
 Utilizes packet-switched network that allocates
transmission resources as needed for dynamic capacity
 Packet of information flows through multiple layers,
from the application layer down to the physical layer
where it is placed on the cable and sent to its
destination and then flows back up to the application
Voip services
 Over-the-top VoIP services utilize the public Internet for at least a
portion of transporting a call
 The public Internet uses best efforts routing that treats all packets the
same and relies on buffering to control congestion, which may degrade
call quality
 Managed VoIP services utilize private IP networks with packet
prioritization and traffic segmentation
 A managed-packet network is able to combine the quality standards of
the PSTN with the flexibility of a packet-based network to assure
quality of service
Technology transition
 Public Internet traffic and managed VoIP traffic may use
the same network protocol but typically traverse over
separate physical interconnection facilities
 IP transition involves the evolution of network technology,
not of physical network facilities
 Due to quality of service and flexibility benefits, the
transition of the Public Switched Telephone Network (PSTN)
is likely to follow the course of managed VoIP services with
interconnected private networks, rather than that of the
public Internet
 A separate Public Communications Network (PCN) will still
exist even as the network technology transitions from circuitswitched to packet-switched
Copper retirement
 IP-based services may be provided over the same types of
physical layer as TDM-based services (i.e., copper, fiber,
coaxial cable, wireless spectrum)
 Existing copper facilities allow more rapid and costeffective deployment of broadband than fiber
 Copper plant is ubiquitous nationwide
 Advances in technology have enabled deployment of
Ethernet-over-copper with speeds up to 100-200 Mbps
 Copper retirement rules should be updated to require
public interest showing and FCC approval prior to
retirement, prohibit physical removal of copper even after
retirement, and require ILECs to provide CLECs with access
to retired copper facilities and comprehensive data
regarding copper availability
Interconnection scenarios
 TDM-VoIP Interconnection
 Media and signaling gateways provide protocol conversion at network
 Primary issue is which party is responsible for costs of conversion
 IP-in-the-middle
 Utilizes IP transport deployed in carrier networks
 Traffic exchange can occur in IP even though end users are served with
 VoIP-to-VoIP
 Ultimate goal is to provide end-to-end IP to allow enhanced features
and functionality
Policy considerations
 ILECs maintain market power and terminating monopoly
regardless of technology transition; forbearance must be required
for regulatory relief
 Telecommunications Act is technology neutral and sections 251 and
252 apply to managed IP interconnection
 Regulation of managed IP interconnection would not equate to
regulation of public Internet content or peering arrangements
 Once the appropriate regime for IP interconnection is established,
market forces can dictate the pace of IP deployment in individual
carrier networks
state commission activity
 Texas – SB-980 prohibits PUC from regulating VoIP or IP-
enabled services
 Illinois – Sprint/AT&T ICA arbitration
 Massachusetts – DTC opened investigation and required
Verizon to file ICA that includes IP interconnection
 California – SB-1161 prohibits PUC from regulating VoIP or
IP-enabled services
FCC activity
 ICC Transformation Order & NPRM
 Attempted to eliminate barriers to IP interconnection by clarifying that
providers must negotiate in good faith upon request for IP
interconnection arrangements
 Technology Transitions Policy Task Force
 Formed to provide recommendations to the FCC to modernize FCC
policies and will hold periodic workshops
 Public Notice sought comment on potential industry trials regarding IP
interconnection, wire center all-IP networks, NG911, copper to fiber
transition, wireline to wireless transition, and others
 VoIP Numbering Order, NPRM, & NOI
 Established trial for interconnected VoIP providers to gain direct access
to numbering resources
 Sought comment on various database and routing issues
Jason Wakefield
Herrera & Boyle, PLLC
October 3, 2013
Wholesale Options
 ILECs & cable companies
 Other options
(in alphabetical order)
 Alpheus
 tw telecom
 XO
 Zayo
 Others?
 Fiber presence in Dallas/Fort Worth, Houston, Austin,
San Antonio, San Marcos, Corpus Christi, Harlingen,
Laredo, and McAllen
 http://www.alpheus.net/4-2/alpheus-network/
 Wholesale services
 Dark fiber and Ethernet, 51 Mbps to 1 Gigabit
tw telecom
 Fiber presence in Dallas/Fort Worth, Houston,
Austin, San Antonio, El Paso and Corpus Christi
 http://www.twtelecom.com/sales-services/
 Wholesale services
 DS0 to OC-48
 Tariffed prices starting from $135/month plus
$100/mile for DS1s and $1150/month plus $300/mile for
 Special construction charges (ICB) for new
 http://www.twtelecom.com/telecomsolutions/wholesale-ethernet/
 Fiber presence in Dallas/Fort Worth, Houston,
Austin, and San Antonio
 http://www.xo.com/carrier/internet-
 Wholesale services
 DS1 to 100 Gigabit Ethernet
 Pricing not listed on website
 Special construction charges (ICB) for new
 Fiber presence in Dallas/Fort Worth, Houston,
Austin, San Antonio, El Paso, Amarillo,
Lubbock, Corpus Christi, Laredo, Midland,
Killeen, Waco, and Denton
 http://www.zayo.com/interactive-network-map
 Build-operate-transfer model
 CLEC pays MRC for dark fiber built by Zayo, then
can take ownership after set number of years
 $1,000 to $3,500 MRC, depending on location
See attached presentation
 Example: partnership with Cbeyond
 CLEC offerings typically limited to larger metro areas
 Joint venture of multiple CLECs to cover more of the
 https://primeaccess.att.com/shell.cfm?section=89
 Verizon
 http://www22.verizon.com/wholesale/solutions/solution/tran
 CenturyLink
 http://www.centurylink.com/business/products/productsand-services/data-networking/metro-optical-ethernet.html
 Time Warner
 http://www.timewarnercable.com/en/businesshome/solutions/carrier-reseller/wholesale-ethernetaccess.html
 Comcast
 http://www.comcast.com/dedicatedinternet/?SCRedirect=true
 Willingness to partner in this type of business model?
Other Options
 Partnership with engineering firm
 Capex up front, unless firm accepts build-operatetransfer model
 $500+ per location passed, plus $500+ per installation
 Partnership with local governments
 Google Fiber example
Reasonable access to poles, conduits, and permits
Fiber Presence - Texas
El Paso
 CLEC pays MRC for dark fiber
Fort Worth
San Antonio
Corpus Christi
built by Zayo, then can take
ownership after set number of
 $1,000 to $3,500 MRC, depending
on location
See attached presentation
 Similar existing partnership with
a National Carrier/ISP company
Jason Wakefield
Herrera & Boyle, PLLC
816 Congress, Suite 1250
Austin, Texas 78701
(512) 474-1492 (o)
(512) 364-2261 (m)
Changing the Landscape
By: Charles D. Land, P.E.
Executive Director, TEXALTEL
Affects Wholesale Service USF Exemption
 Timeline
 FCC Order adopted November 1, 2012 in WC Docket No.
 Effective for 499A reports after 1-1-2014.
 Comments filed September, 2013 on Form 499-A
Status Quo
 Each reseller certifies annually to wholesale provider
that it pays USF on retail services and is exempt on
 USAC has rankled many with audits and many
reclassifications from reseller to end user – big back
bills to wholesalers.
Objectives of Proceeding
 Broaden the base on which interstate USF is paid.
 Address requests for clarification from USAC
 Address issues raised by carriers
 Resellers must certify by service that they are reselling.
Reselling defined to be:
 1) incorporates the purchased telecommunications services
into its own offerings and
 2) can reasonably be expected to contribute to support
universal service based on revenues from those offerings.
What changed?
 Services purchased to provide internet service (which is not subject to USF)
and other services not subject to USF assessment are no longer USF exempt.
 When doing an audit, USAC is required to consider “other reliable proof” that
the wholesaler’s customer is a reseller. In the past USAC assessed USF if
wholesaler failed to follow 499 instructions, even if there was evidence that the
customer is a reseller.
 Double collection prohibited – if the wholesaler can show by clear and
convincing evidence that the reseller paid USF on services provided with the
resold service, USAC cannot require the wholesaler to pay USF fees on that
 A wholesaler who complies with all instructions with Form 499-A has a “safe
harbor” and USAC cannot reclassify revenues as “end user” and assess
additional fees.
What was clarified?
 XOCS had outdated reseller certificates (some taken when service first provided, some
obtained during the audit 3 years later). FCC said these are not acceptable to show
“reasonable expectation” but may be considered as “other reliable proof” that USF fees
were paid.
 TelePacific asked that all services obtained for resale be exempt, including those to
provide internet or other retail services not subject to USF. FCC denied relief. Result is
that network based providers pay no fees on internet services and resellers pay USF fees
on transport purchased to provide internet.
 “Safe Harbor” –if the provider demonstrates that it has a reasonable expectation that its
customer is contributing as a reseller “based on the guidance provided in the FCC Form
499-A instructions”. This means customer annual certifications are in hand when the
carrier files its 499-A report. If the reseller lies, wholesale provider is not liable.
 A provider who fails to show “reasonable expectation” (didn’t follow the form 499-A
instructions) may submit “other reliable proof” when USAC audits. Providers are
expected to see that customers are in the FCC data based as USF payers. Proof that each
service provided is used to provide a service on which the reseller pays USF is also
required. If USAC finds during the audit that the customer lied, or for any other reason
isn’t a “reseller”, wholesaler is likely liable.
What does this mean to TEXALTEL
 Make careful note of “mixed use”. If a wholesale service is used to provide 2 or more
services, some of which are subject to USF and some not, the reseller may still certify that
the service is resold and eligible for USF exemption if the reseller pays on those services
subject to USF assessment.
 Be sure that certification forms are turned in timely each year on each wholesale service
(depending on form 499-A instructions, maybe by class of service).
 Expect that any wholesale service used exclusively to provide internet will be subject to
 Wholesale providers – watch closely when the Form 499-A instructions are issued.
 All – this will require changes in how you do parts of your business. Don’t snooze or you
will lose.
 Remember the FCC’s goal – any transport associated with internet service is
“telecommunications” and subject to USF. They haven’t fully accomplished this yet, but
this is what they think they are doing.