U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

20–745PDF 2005

HOW INTERNET PROTOCOL-ENABLED SERVICES

ARE CHANGING THE FACE OF COMMUNICATIONS: A LOOK AT THE VOICE MARKETPLACE

HEARING

BEFORE THE

SUBCOMMITTEE ON TELECOMMUNICATIONS AND 

THE INTERNET

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

MARCH 16, 2005

Serial No. 109–44

Printed for the use of the Committee on Energy and Commerce

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

COMMITTEE ON ENERGY AND COMMERCE

JOE BARTON, Texas, Chairman 

RALPH M. HALL, Texas 

MICHAEL BILIRAKIS, Florida 

Vice Chairman 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. ‘‘CHIP’’ PICKERING, 

Mississippi, Vice Chairman 

VITO FOSSELLA, New York 

ROY BLUNT, Missouri 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

C.L. ‘‘BUTCH’’ OTTER, Idaho 

SUE MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

JOHN D. DINGELL, Michigan 

Ranking Member 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, Jr., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MIKE DOYLE, Pennsylvania 

TOM ALLEN, Maine 

JIM DAVIS, Florida 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

BUD ALBRIGHT, Staff Director 

JAMES D. BARNETTE, Deputy Staff Director and General Counsel 

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET

FRED UPTON, Michigan, Chairman 

MICHAEL BILIRAKIS, Florida 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

ED WHITFIELD, Kentucky 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

CHARLES W. ‘‘CHIP’’ PICKERING, 

Mississippi 

VITO FOSSELLA, New York 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

JOHN SULLIVAN, Oklahoma 

MARSHA BLACKBURN, Tennessee 

JOE BARTON, Texas, 

(Ex Officio) 

EDWARD J. MARKEY, Massachusetts 

Ranking Member 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

MIKE DOYLE, Pennsylvania 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, Jr., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

JOHN D. DINGELL, Michigan, 

(Ex Officio) 

(II) 

C O N T E N T S 

Page

Testimony of: 

Erickson, Paul, Chairman, Sunrocket ............................................................ 16

Grivner, Carl J., Chief Executive Officer, XO Communications ................... 21

Melcher, John, Executive Director, Greater Harris County 911 Emergency Network ............................................................................................... 27

Puckett, Karen, President, Chief Operating Officer, Centurytel, Inc .......... 35

Rutledge, Thomas M., Chief Operating Officer, Cablevision Systems Corporation .......................................................................................................... 40

Shlanta, Mark, Chief Executive Officer, South Dakota Network Communications ......................................................................................................... 43

Additional material submitted for the record: 

Rutledge, Thomas M., Chief Operating Officer, Cablevision Systems Corporation, response for the record ................................................................. 74

(III) 

(1)

HOW INTERNET PROTOCOL-ENABLED SERVICES ARE CHANGING THE FACE OF COMMUNICATIONS: A LOOK AT THE VOICE MARKETPLACE 

WEDNESDAY, MARCH 16, 2005

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON ENERGY AND COMMERCE, 

SUBCOMMITTEE ON TELECOMMUNICATIONS

AND THE INTERNET, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 10:09 a.m., in room 

2123 of the Rayburn House Office Building, Hon. Fred Upton 

(chairman) presiding. 

Members present: Representatives Upton, Bilirakis, Stearns, 

Gillmor, Whitfield, Shimkus, Wilson, Pickering, Fossella, Radanovich, Bass, Walden, Terry, Ferguson, Sullivan, Blackburn, Barton 

(ex officio), Markey, Wynn, Doyle, Gonzalez, Inslee, Boucher, 

Towns, Brown, Rush, Stupak, and Dingell (ex officio). 

Staff present: Howard Waltzman, chief counsel; Neil Fried, majority counsel; Will Nordwind, policy coordinator; Jaylyn Jensen, 

senior legislative analyst; Anh Nguyen, legislative clerk; Johanna 

Shelton, minority counsel; and Peter Filon, minority counsel. 

Mr. UPTON. Good morning, everyone. 

Today’s hearing is entitled ‘‘How Internet Protocol-Enabled Services are Changing the Face of Communications: A View from the 

Voice Marketplace’’. 

In 1876, Alexander Graham Bell uttered the words, ‘‘Watson 

come here,’’ into an experimental device, which came to be known, 

of course, as the telephone. 

The telephone dramatically changed the way that the world communicated. We have had the privilege of living through some similarly dramatic innovations in communications technologies, such as 

the Internet, cell phones. We are witnessing yet another dramatic 

innovation in the form of Voice-over Internet Protocol, or VoIP. 

Consumers are beginning to catch on. The number of VoIP subscribers is continuing to climb. There were more than a million 

VoIP subscribers at the end of 2004, 8 times as many as a year earlier, and there are likely to be 2.8 million VoIP subscribers by the 

end of 2005. Some, including myself, predict that that number will 

reach at least 16 million by the end of 2008. 

Without a doubt, intermodal facilities-based competition has 

taken root with VoIP being delivered into homes and businesses 

over multiple technological platforms, as today’s diverse witness 

2

panel will demonstrate. All of this robust competition is a byproduct of those free market forces that have been allowed to take root 

where government, by and large, has kept its hands off, so far. 

But VoIP is still in its infancy, and the regulatory ground upon 

which VoIP stands is not as firm as I think it needs to be in order 

to ensure that it reaches its projected potential. I would note that 

only 7 individuals, 5 FCC commissioners and 2 Federal District 

Court judges, stood in the way of VoIP potentially being regulated 

by 51 State public utility commissions. And though I commend the 

FCC for rightly declaring VoIP’s services to be interstate and subject to the FCC’s exclusive jurisdiction. The FCC continues to grapple with a host of other important policy matters in its pending IPenabled services proceeding. 

I believe that Congress ultimately has the responsibility to definitely create the proper framework to ensure that this facilitiesbased competition in the VoIP marketplace is allowed to flourish, 

free from government management for the benefit of all consumers. 

And this is part of the mission that we hope to accomplish this 

year. On a bipartisan basis, as we seek to modernize our telecommunication laws, bringing them up to speed with today’s as 

well as tomorrow’s technology. That won’t necessarily be an easy 

task, we know that, but we will have to grapple with a number of 

thorny issues, such as universal service, interconnection, intercarrier compensation, E-911, disabled access, just to name a few. To 

paraphrase President Kennedy, we will undertake this mission not 

because it is easy, but because it is hard. 

I want to thank all of our witnesses for their participation today 

and their efforts to inform our policymaking decisions as we move 

forward legislatively this year. 

[The prepared statement of Hon. Fred Upton follows:]

PREPARED STATEMENT OF HON. FRED UPTON, CHAIRMAN, SUBCOMMITTEE ON

TELECOMMUNICATIONS AND THE INTERNET

Good morning. Today’s hearing is entitled: How Internet Protocol Services are 

Changing the Face of Communications: A View from the Voice Marketplace. 

In 1876, Alexander Graham Bell uttered the words, ‘‘Watson, come here’’ into an 

experimental device which came to be known as the telephone. Of course the telephone dramatically changed the way the world communicated. We have had the 

privilege of living through some similarly dramatic innovations in communications 

technology, such as the Internet and cell phones, and we are witnessing yet another 

dramatic innovation in the form of Voice over Internet Protocol, or VoIP. 

And consumers are beginning to catch on. The number of VoIP subscribers is beginning to climb. There were more than 1 million VoIP subscribers at the end of 

2004—eight times as many as a year earlier—and there likely will be 2.8 million 

VoIP subscribers by the end of 2005. Some predict the number to reach 16 million 

by the end of 2008. 

Without a doubt, inter-modal, facilities-based competition has taken root with 

VoIP being delivered into homes and businesses over multiple technological platforms, as today’s diverse witness panel will demonstrate. 

All of this robust competition is a by-product of those free-market forces that have 

been allowed to take root where government, by and large, has kept its hands-off—

so far. 

But VoIP is still in its infancy, and the regulatory ground upon which VoIP stands 

is not as firm as I think it needs to be in order to ensure that it reaches its projected 

potential. I would note that only seven individuals—5 FCC commissioners and 2 

federal district court judges—stood in the way of VoIP potentially being regulated 

by 51 state public utility commissions. And I commend the FCC for rightly declaring 

VoIP services to be interstate and subject to the FCC’s exclusive jurisdiction. The 

FCC continues to grapple with a host of other important policy matters in its pending IP-enabled services proceeding. 

3

But I believe that Congress ultimately has the responsibility to definitively create 

the proper framework to ensure that this facilities based competition in the VoIP 

marketplace is allowed to flourish—free from government management—for the 

benefit of the consumers. 

And this is part of the mission we hope to accomplish this year, on a bipartisan 

basis, as we seek to modernize our telecommunications laws, bringing them up to 

speed with today’s and tomorrow’s technology. This won’t necessarily be an easy 

task. We will have to grapple with a number of thorny issues, such as universal 

service, interconnection, inter carrier compensation, E-911, and disabled access, just 

to name a few. But to paraphrase President Kennedy, we will undertake this mission not because it is easy, but because it is hard. 

I want to thank our witnesses for their participation today and their efforts to 

inform our policymaking decisions as we move forward legislatively this year.

Mr. UPTON. And I will recognize, for an opening statement, my 

friend and colleague from Pennsylvania, Mr. Doyle. 

Mr. DOYLE. Thank you, Mr. Chairman. 

Mr. Chairman, it is no secret that in just a little more than a 

decade of widespread use, the Internet has revolutionized our entire way of life. Communications, e-commerce, personal finance, 

distance learning, and scientific research are only a few of the 

countless fields that have expanded almost as fast as the Internet 

itself. And as amazing as it has been over the last decade to experience and witness the new technologies that fueled this growth, I 

believe we have just seen the tip of the iceberg. 

As technology continues to evolve, we all stand to benefit with 

not only new conveniences, devices, and capabilities, but also increased competition in almost every industry. And as a strong believer in competitive marketplaces because of the benefits they provide to consumers, I must say I am excited about the effect that 

Internet protocol-enabled services are having on the telecommunications industry. 

Voice-over Internet Protocol is already shaking things up. According to a recent study, there were more than 1 million VoIP 

subscribers at the end of 2004, which was 8 times as many as just 

1 year earlier. A technology research firm predicts that there will 

be 16 million subscribers by 2008. 

With that kind of growth, it is imperative that we address some 

major issues surrounding VoIP in the very near future. 

Because VoIP is so new and different from the way in which telephone calls have always been made, we have a unique opportunity 

to use the VoIP issue to set some important precedence for the future of the telecommunications industry. For a while, it seemed 

that the biggest issues seemed to be who should have the right to 

regulate VoIP services. And while I believe that the FCC acted correctly in declaring these services as interstate in nature and therefore not subject to State regulation, I remain sensitive to some of 

the issues that have been raised by State public utility commissioners. 

Most notably, I believe there is a need for an effective and reliable E-911 network. My instinct tells me that technology will eventually solve this problem, but the tragic incident in Houston that 

Mr. Melcher will testify about makes a pretty strong case for close 

government scrutiny of E-911 functionality. 

The fees that telecommunication companies pay into the Universal Service Fund or must pay to each other in connection 

charges will always be vitally important to promoting competition 

4

in the industry. As we consider how these fees should relate to 

VoIP technology, we must do so carefully so that we do not slow 

its growth as a significant driver of competition within the industry. 

There are, of course, countless other important issues we have to 

address if we truly want a competitive industry. It is clear to me, 

though, that we are on the cusp of seeing an industry-wide transformation driven by the promise of VoIP. 

I also want to thank our witnesses for agreeing to appear before 

us to testify today. I look forward to hearing your views on the 

promises and risks we face as we move forward in the process. 

Mr. Chairman, I thank you, and I yield back the balance of my 

time. 

Mr. UPTON. Thank you. 

Mr. Shimkus. 

Mr. SHIMKUS. Thank you, Mr. Chairman. 

Three brief points. We know that many 911 calls over Voice-over 

Internet Protocol are not being sent to the appropriate piece apps, 

and we know that the public expects that when a 911 call is made 

that it will go to the appropriate emergency responders. 

With that, Mr. Chairman, I ask unanimous consent to submit the 

consumer alert posted by the Attorney General from the State of 

Texas over this issue. 

Mr. UPTON. Without objection. 

[The information is available at: http://www.oag.state.tx.us/alerts/

alertslview.php?id=79&type=1] 

Mr. SHIMKUS. And the other point that I just want to highlight 

is people in rural America are really going to be concerned that 

this accessibility of this technology will never roll out to them, and 

representing 30 counties in the southern part of the State of Illinois, of course, I have to raise that issue. 

With that, Mr. Chairman, thank you, and I yield back. 

Mr. UPTON. Thank you. 

Mr. Dingell. 

Mr. DINGELL. Mr. Chairman, I thank you, and I commend you 

for holding this hearing. 

Voice-over Internet Protocol, VoIP, technology is profoundly 

changing the telecommunications marketplaces. Many predict that 

VoIP services will soon replace telephony as we know it as the 

dominant method of voice communications. If so, consumers stand 

to benefit from the greater competition, lower prices, and exciting 

new applications that VoIP promises. 

As VoIP and other breathtaking technologies take hold, policymakers must ensure the telecommunications laws keep pace and 

provide appropriate boundaries and guidance. Skepticism about 

over-regulation is a good way to start. I agree that it would be foolish to impose Title II common carrier regulation in its entirety on 

VoIP service offerings. Imposing legacy economic regulation runs 

the risk of stifling competition, innovation, and investment. Indeed, 

Congress anticipated that changes in technology might soon undermine the need for certain common carrier-type regulations when it 

granted forbearance authority to the Federal Communications 

Commission. 

5

Some, however, would prefer not to use those tools effectively. Instead, they would classify VoIP as an unregulated information 

service subject only to the unspoken whims of FCC’s Title I authority. I am troubled by this rush to remove all regulations. The FCC 

may well find that Title I, especially as interpreted by the courts, 

lacks the tools necessary to protect consumers. For example, when 

the FCC was recently called upon to stop a carrier from blocking 

another’s VoIP calls, the Commission instinctively turned to its familiar Title II authority. 

As we consider modernizing the Telecommunications Act and the 

FCC continues studying the proper regulatory regime for IP-related 

and enabled services, several overriding public principles must not 

be compromised. 

First, there have long been social obligations attached to our system of communications which remain critical in an IP environment. 

These include preserving universal service, emergency services, law 

enforcement, and disability access. 

Second, other requirements have been necessary to ensure fair 

competition and an efficient overall telecommunication system. 

Baseline interconnection, intercarrier compensation, numbering, 

and access requirements may need to be applied in this new environment. 

Third, as we move forward, we should not take any action which 

would disrupt the ability of States to perform core consumer protection functions. These key policy principles are not dependent upon 

a switch-based architecture, so I commend those in the VoIP industry who are using their skills and rising to their broader social responsibility. 

Unfortunately, some providers are shirking their duties and consumers are suffering the consequences. As we will hear today, the 

dialing of 911 through some VoIP services does not properly connect consumers to emergency services. It is critical that all industry players work together to find a VoIP E-911 solution. Consumers 

must not be put in the position of discovering the lack of 911 

functionality too late or in the midst of desperate circumstances. 

I hope that our witnesses will speak to the progress they are 

making to achieve these goals. As we reflect on the transformative 

nature of new communications technologies, we can not wipe away 

the core foundations that sustain our communications system for 

the benefit of all of our citizens. 

And I would remind my colleagues on the committee and our witnesses that as we move in this direction, we must go in a fair direction. We must see to it that we treat all in the industry fairly and 

that the system which evolves through our leadership and the work 

of the Commission is one which, in fact, will work fairly to allow 

the market to achieve the kind of competition and the kind of result that will enable this country to best take advantage of the very 

best opportunities that exist in a competitive marketplace instead 

of having the kind of stultifying things, which we have seen of late 

happening through the unfortunate behavior of the FCC. 

Mr. Chairman, I thank you for your kindness in recognizing me. 

Mr. UPTON. Thank you very much. 

Mr. Pickering. 

6

Mr. PICKERING. Mr. Chairman, I thank you for your leadership 

on this issue and for the hearing today. 

I want to just open with a little context of where we have been, 

where we are, and where we hope to get. 

As you all know, we, on a very bipartisan basis, in the last Congress joined together in a very broad support across Congress to 

encourage the FCC to make sure that Voice-over Internet Protocol, 

that application was considered solely an interstate or Federal jurisdiction. The FCC took that action. And as we come in this Congress now to look at where we need to go, not only to codify and 

give certainty to the FCC decision on the preemption as it relates 

to voice, but in the broader context of all IP-related applications, 

the rights and the responsibilities as it relates to law enforcement, 

E-911 to universal service to what degree if IP networks or applications interact with PSTN, should there and under what formula 

should there be contributions to U.S. health. 

Then as we look at the responsibilities in that regard, it is critical that we also address intercarrier compensation. And I think 

that any effort to address IP should also try to solve the intercarrier compensation issue as a way to clear that or give certainty to 

the compensation of networks and applications as we move forward. 

The other issue that I think will be critical and will be highlighted today will be the need for interconnection. If we are going 

to have Voice-over Internet, we must have interconnection to be 

able to complete a 911 call. So the interconnection and the numbering, this is an opportunity for us to create the healthy environment for competition, for innovation, and for investment. But this 

is very critical that we get it right. I look forward to working with 

Chairman Upton, Chairman Barton, Congressmen Stearns and 

Boucher as we work together to find consistence on this committee. 

And to that end, I plan to introduce legislation as we return from 

the April recess, that will address the issues that I believe that are 

important, finding the right, if you would call it, pragmatic partnership with States and localities for what should be regulated at 

the State but at the same time removing all barriers to entry so 

that we can have the certainty of investment with IP-related interconnections. The rights and the responsibilities, and then, as we 

move forward, what access to networks should be maintained as we 

make sure that in the new world where we have major mergers 

taking place, that there is the access and the interconnection that 

will guarantee—and the interoperability that will guarantee competition of networks and applications in the future. 

I look forward to working with every member of this committee 

as I introduce the legislation and then as we move forward, Mr. 

Chairman, to find the common ground on a good, competitive investment and innovation strategy for the future of the Internet and 

telecommunications. 

Thank you, Mr. Chairman. 

Mr. UPTON. Thank you. 

Mr. Markey. 

Mr. MARKEY. I thank the chairman. And I thank you so much 

for holding this hearing. 

7

The Internet-Protocol-based telecommunications services continue to make inroads into markets traditionally served through 

older technologies. These digital service offerings are exactly the 

kind of innovative broadband services the Telecommunications Act 

of 1996 was intended to unleash. 

Over and over again, in 1994, 1995, and 1996, we had this conversation about how the Telecommunications Act would create the 

new digital era. And now we are 8 years deep into it, and it is 

great that we can just continue this conversation. And it was because of the all-content voice, video, data, or a combination that 

can now be expressed in packets of zeros and ones that these digital packets can be delivered almost over any broadband telecommunications infrastructure. The first hearing we had on that 

was back in 1989, 1990 that we would move to packet switching. 

The company which invented it that built the Internet was hired 

to do the Internet. It was up in my Congressional District. We had 

the hearings down here talking about how we would move to packet switching in 1989 and 1990. 

These Internet-based technologies are buffeting many of the incumbent marketplace participants across many industries. In the 

telephone market, consumers stand to benefit from advances in 

technology, such as VoIP, which possess the ability to bring additional features and services and lower costs to what we once called 

plain old telephone service. 

Policy makers need to foster initiatives that promote greater 

broadband competition. Such competition is necessary to drive 

broadband access prices for consumers lower. The whole key to the 

deployment of this broadband technology has been robust, marketbased, Darwinian, paranoia-inducing competition. The Bells had invented broadband DSL back 20 years before but still hadn’t deployed it until we introduced competition. And this committee did 

it, and they should be proud of it. 

If VoIP providers are assured unfettered access to the consumer 

broadband marketplace, competition can flourish in a way that encourages innovation and price compassion. Consumers certainly deserve access to new Internet-based services, such as VoIP. Consumers also deserve to receive these services from multiple providers so that they benefit not only from access to these new technologies, but also from improved service quality and lower prices. 

Yet consumers must also retain the important consumer protections developed over the years for these services. Consumer protections must be something that goes hand-in-hand with technological 

innovation, and this committee has done it over the last 70 years, 

and I know this committee is up to doing it once again to create 

that package of benefits for consumers. Just because some company 

delivering a telecommunications service utilizes a new technology 

to deliver it doesn’t mean that the nature of the service itself 

changes, from a consumer standpoint. The need for consumer privacy rules, billing protections, fraud protections, emergency 911 

services, law enforcement access, or ensuring affordable, residential 

service does not disappear simply because a voice call travels in 

packets rather than in dedicated circuits. We all know that on this 

committee. This is the expert committee. We know that dedicated 

8

circuits and packets are all the same, from the perspective of the 

consumer in terms of what they are expecting. 

Public safety and public interests are directly implicated by the 

lack of some of these rules for the VoIP marketplace. The Commission’s ad hoc regulatory classifications over the last few years have 

left providers without clear obligations or clear rights and have left 

consumers without adequate consumer protection and disclosure, 

particularly as it pertains to emergency 911 service. 

Today’s hearing will provide us with an excellent opportunity to 

hear how the industry is confronting the rise of Internet telephony 

and allow us over the coming months to gauge whether any 

changes are necessary to existing telecommunications statutes or 

whether adjustments in this area is solely needed to regulatory interpretations of existing laws. 

Mr. Chairman, I thank you for this all-important hearing. 

Mr. UPTON. Right on the nose, 5 minutes. 

Ms. Wilson. 

Ms. WILSON. Thank you, Mr. Chairman. I look forward to this 

hearing today, and thank you for holding it, because some of the 

issues that we are facing in this subcommittee are important ones 

and they will determine how quickly this technology can be available to consumers and how much choice people really get when we 

are changing the way we communicate with each other. And there 

are also—there are some challenges that we need to meet in order 

to make sure that consumers have low-cost service and a lot of variety and new technologies to communicate with each other. Certainly one that has been mentioned already is emergency response 

and making sure that these new technologies integrate well with 

the emergency response system so that no matter what kind of a 

phone you are using, you can connect with the police or the fire department that is near you. And we need to make sure that happens. 

The second area that concerns me and many folks in the State 

of New Mexico is how these new technologies will affect service in 

rural areas. And we have—we made a policy decision a long time 

ago when everybody was still on party lines and hanging up their 

telephones on the wall that we should have universal service to 

telephones across America. And that policy decision I think still 

holds today, irrespective of the change in technology. 

So we need to make sure that as people migrate to new technologies, like Voice-over Internet Protocol, how do we make sure 

that the mechanisms are still there to make sure that you can still 

get phone service of some type in New Mexico. And that is an important—that will probably require some statutory and regulatory 

change. 

And the third thing is consumer choice. What is driving all of 

this is Americans’ desire to have new technologies, new services at 

a lower cost, and that means in some way we may need to make 

sure that these new technologies have access to the network, that 

they can hook up to the network that is there so that innovative 

technologies—that you have an option to plug in your Internet Protocol phone and that will work, because as a requirement for whoever owns the wires in your street, to let you plug in. 

9

So those issues we are going to have to deal with here in this 

committee. I look forward to hearing what you all have to say 

about where these technologies are going and what consumers in 

America want. 

And I thank you again, Mr. Chairman, for holding this hearing. 

Mr. UPTON. Mr. Stupak. 

Mr. STUPAK. Thank you, Mr. Chairman, and thank you for pledging to hold a series of hearings on how Internet Protocol-enabling 

services are changing the communications world. And thank you 

for focusing today’s hearing on the Voice-over Internet Protocol, or 

VoIP. 

VoIP and other emerging technologies hold great promise, and 

our communications law should reflect that promise. At the same 

time, any changes to the Telecommunications Act must take into 

account the challenges of providing communications services in 

rural America. 

As we talk about VoIP today, we must remember that VoIP is 

meaningless without broadband. 

Let me share how broadband is coming to part of my District. 

The Upper Peninsula of my District has 200 communities, the 

biggest city being the city of Marquette, with only 20,000 people. 

In 2003, 80 communities had access to broadband. By 2005, that 

number had grown to 120 communities. I know that number will 

continue to climb, because communities realize what is at stake. 

Just as towns bypassed by railroads became the ghost towns of 

the 19th century, towns without broadband will have no place in 

today’s world. Simply put, rural communities will invest in 

broadband or they will become the ghost towns of the 21st century. 

The communities of my District have worked hard to bring 

broadband home. They have used cable, DSL, wireless, and even 

satellite to do it. We have Wi-Max systems on top of water towers 

connecting to Wi-Max systems on neighboring water towers connected to cable or DSL. Necessity has fostered ingenuity. 

But ingenuity alone will not and can not bring broadband to 

rural America. Rural America needs a strong universal service system that is responsive to its needs and is well funded. Broadband 

came to the Upper Peninsula through the USF funds. USF funds 

were used to link all 15 hospitals in the Upper Peninsula and to 

link 45 libraries as well as to bring long distance learning to 

schools. At the same time, the incumbent carriers in my District 

heavily depend on the universal service and access charges to 

maintain and upgrade their systems and to provide broadband 

themselves. 

Dedication of the small, independent, incumbent carriers have 

made them innovators. While SBC waited until a year ago to bring 

broadband to the Upper Peninsula for economic reasons, the small, 

independent carriers and cable have been providing broadband for 

more than 3 years. 

The communities of my District depend on independent incumbents for broadband. But these carriers depend upon universal 

service and the intercarrier compensation to survive. 

Therefore, the first rule of any reform must be, first, do no harm 

to universal service and intercarrier compensation. We need to address the funding challenges to USF in a way that does not shrink 

10

the pot. We need comprehensive reform of the intercarrier compensation system in a way that recognizes the dependence of these 

funds by our rural providers who go where no one else wants to 

go and provide some of the most progressive telecommunications 

services. 

We must also look at ways to embrace new technologies that can 

help rural America become an equal partner in this digital revolution. It is time all communities in my District and other areas of 

rural America are connected to the future. 

Mr. Chairman, thank you for holding this hearing, and I look forward to future hearings on this issue. And I will be in and out 

since we have got three hearings all scheduled at the same time. 

Mr. UPTON. That is why we are against cloning. 

Mr. Barton. 

Chairman BARTON. Thank you, Mr. Chairman. 

We would like to thank you for holding the hearing today. Voiceover Internet Protocol, or VoIP, is a revolutionary technology. It 

has begun to have a revolutionary effect on the telecommunications 

industry. VoIP’s services are slowly but surely entering the mainstream. This hearing isn’t an ad for Vonage, but it is worth pointing out how that pioneer company has over half a million telephone 

customers now thanks to its inside innovation. Cable companies 

like Cablevision and Time Warner are beginning to also offer VoIP 

services to everybody they know. Comcast plans to offer its version 

of VoIP to 95 percent of its network by the end of this year, I am 

told. 

Regardless of who offers it, we want all Americans to have the 

option to pick up their telephones and talk to one another over the 

Internet as if they were talking over phone lines, only cheaper. 

Voice communication is only the beginning. 

VoIP is the baby that the Internet left out on our doorstep. It is 

up to us to raise it. If we don’t smother it with stacks of loving regulations, it will grow up and make us proud. As VoIP goes mainstream, Congress and the FCC need to ensure that the proper regulatory framework is in place so that VoIP’s services can thrive. 

Last November, the FCC took the right step, at least in my opinion, in declaring the VoIP services to be interstate, subject to the 

FCC’s exclusive authority. That ruling ensures that the fledgling 

VoIP providers will not be bogged down with 52 potentially different sets of regulations governing VoIP. The FCC in its IP-enabled services proceeding also has a number of other policy-related 

decisions to make. 

This year, it is my intention to work with Chairman Upton, Mr. 

Dingell, Mr. Markey, and other members of this committee to craft 

legislation that reflects how much technology has changed the communication industry and the manner in which that industry should 

be regulated. This committee will have a number of decisions to 

make regarding policy issues surrounding the deployment of VoIP 

services. For example, should Congress statutorily declare VoIP 

services to be interstate? How should VoIP’s services be classified? 

Should VoIP providers have the right to interconnect with the public switch telephone networks? Should VoIP providers contribute to 

universal service? What should be the compensation scheme between VoIP providers and telephone companies? Should VoIP proVerDate 0ct 09 2002 14:37 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6602 F:\DOCS\20745.TXT HCOM1 PsN: JOEP
11

viders be required to provide any 911 services? And how can Congress ensure that consumers have the freedom to use whatever 

VoIP provider they want without interference from the underlying 

broadband provider? These are all important questions and deserve 

serious consideration. 

I hope that our witnesses today can help shed some light on 

these issues faced by our committee. I look forward to the testimony. I want to thank each of you for being here today. 

[The prepared statement of Hon. Joe Barton follows:]

PREPARED STATEMENT OF HON. JOE BARTON, CHAIRMAN, HOUSE ENERGY AND

COMMERCE COMMITTEE

Mr. Chairman, thank you for holding this hearing today. Voice over Internet Protocol, or VoIP, is a revolutionary technology that has begun to have a revolutionary 

effect on the communications industry. 

VoIP services are slowly but surely entering the mainstream. This hearing isn’t 

an ad for Vonage, but it sure is worth pointing out how that pioneer company now 

has half a million telephone customers, thanks to its insight and innovation. Now 

cable companies like Cablevision and Time Warner are offering VoIP services to everybody they know. Comcast plans to offer its version of VoIP throughout 95 percent 

of its network by the end of this year. 

Regardless of who offers it, we want all Americans to have the option to pick up 

their telephones and talk to one another over the Internet as if they were talking 

over phone lines, only cheaper. And voice communication is only the beginning. 

VoIP is a baby that the Internet left on our doorstep. It’s up to us to raise it. If 

we don’t smother it with stacks of loving regulations, it will grow up and make us 

proud. 

As VoIP goes mainstream, Congress and the FCC need to ensure that the proper 

regulatory framework is in place so VoIP services can thrive. Last November, the 

FCC took the right step in declaring VoIP services to be interstate, subject to the 

FCC’s exclusive authority. 

That ruling ensures that fledgling VoIP providers will not be bogged down with 

52 potentially different sets of regulations governing VoIP services. The FCC, in its 

IP-enabled services proceeding, also has a number of other policy-related decisions 

to make. 

This year, it is my intention to work with Chairman Upton, Mr. Dingell, Mr. Markey, and other Members of the Committee to craft legislation that reflects how much 

technology has changed the communications industry and the manner in which the 

industry should be regulated. This Committee will have a number of decisions to 

make regarding policy issues surrounding the deployment of VoIP services. 

For example, should Congress statutorily declare VoIP services to be interstate? 

How should VoIP services be classified? Should VoIP providers have the right to 

interconnect with the Public Switched Telephone Network (PSTN)? Should VoIP 

providers contribute to universal service? What should the compensation scheme be 

between VoIP providers and telephone companies? Should VoIP providers be required to provide E911 services? And how can Congress ensure that consumers have 

the freedom to use whatever VoIP provider they want without interference from the 

underlying broadband provider? 

I hope our witnesses will shed some light today on these and other issues faced 

by our Committee. I look forward to the testimony of our witnesses and I thank 

them for participating in today’s hearing.

Chairman BARTON. Thank you, Mr. Chairman. 

Mr. UPTON. Mr. Brown. 

Mr. BROWN. Thank you, Mr. Chairman, and thanks to our witnesses for joining us this morning. I especially appreciate Ms. 

Puckett’s suggestions in her testimony. Thank you for that. 

VoIP is one of many new innovative technologies that is rapidly 

expanding and creating greater competition in the voice market. 

Investment in these technologies can truly be beneficial to everyone. While it is clearly important to support the emergence and 

success of these new technologies, affordable access to existing 

technologies should also be a priority. One clear example of the 

12

need to ensure affordable access to VoIP, which is inexorably tied 

to the availability of broadband, without a broadband connection, 

you can not use VoIP. 

As companies roll out their new services, their focus is predominantly on the most profitable customers and markets. Consumers 

in low-income and rural communities must not be squeezed out of 

this marketplace. If these customers can’t gain access to affordable 

technologies and services, they lose ground in their ability to develop the skills necessary for higher paying jobs. And if small businesses can’t gain access to new technologies, they lose the ability 

to compete and grow in today’s more difficult economy. It is not 

only a consumer access issue, it is an economic development issue. 

It is now more important than ever to preserve universal service 

and the e-rate program. These programs have provided not only 

crucial Internet access to schools and libraries in all of our Districts, but simple basic phone service to those who can least afford 

it but perhaps need it most. 

I look forward to working with my committee colleagues to ensure everyone affordable access. 

Thank you, Mr. Chairman. 

Mr. UPTON. Mr. Bass. 

Mr. BASS. Thank you, Mr. Chairman. 

And rather than repeat what has already been said, I would simply like to say that I certainly agree wholeheartedly with the good 

remarks of my colleagues from Texas and New Mexico and Michigan, Massachusetts. I think the issues have been very clearly outlined today, and I am look forward to hearing from the witnesses. 

Mr. UPTON. Mr. Gonzalez. 

Mr. GONZALEZ. I will waive. 

Mr. UPTON. Mr. Towns. 

Mr. TOWNS. Thank you very much, Mr. Chairman. 

The landscape of the telecommunications industry is changing 

rapidly due to the ramifications and development of Voice-over 

Internet Protocol. 

I would like to welcome, of course, the witnesses today, especially 

Tom Rutledge, the Chief Operating Officer from Cablevision in 

New York. Delighted. 

Cablevision is offering voice video data services to many of our 

constituents and should also be recommended—or actually commended for taking the initiative early on to solve the 911 issue for 

voice subscribers. 

While still in the beginning stage, adoption of Voice-over Internet 

Protocol is rapidly growing. And widespread adoption is expected 

with the next few years. As we look—put in the horizon and try 

to predict the development of this new service, I believe we should 

strive for a regulatory framework that protects consumers while 

still encouraging investment, innovation, and competition. 

I am pleased that most companies offering Voice-over Internet 

Protocol recognize that we must balance the need to promote the 

technology with the need to protect consumers at the same time. 

The question is where is the balance. For me, when it comes to 911 

services, I strongly believe that all voice providers must be able to 

provide this service. Consumers have come to expect this service, 

and the future of someone’s life should not depend on who their 

13

phone service provider is. To encourage investment, companies 

must operate under a predictable, national framework for services 

pricing and intercarrier compensation. 

Finally, as we work toward a framework that levels the playing 

field among all telecommunication competitors, I am not convinced, 

at this point, that we can foster the most competitive environment 

by just tackling Voice-over Internet Protocol or whether a broader 

approach to what all Internet service is needed. 

Thank you very much, Mr. Chairman, and I look forward to 

hearing from our witnesses. 

On that note, I yield back. 

Mr. UPTON. Mr. Terry. 

Mr. TERRY. I waive. 

Mr. UPTON. Mr. Ferguson. 

Mr. FERGUSON. Thank you, Mr. Chairman. I appreciate you holding this hearing. 

This year, we certainly have our work cut out for us as we take 

on a considerable task of updating and modernizing our telecommunications laws for the information age. The advent of Internet has changed the way Americans communicate in countless and 

exciting ways, and as a result, is changing the landscape of the 

telecommunications marketplace. 

Traditional voice telecommunication services are no longer the 

only avenues open to consumers, and Voice-over Internet Protocol 

services are becoming an attractive, efficient, and affordable option. 

Along with the rise of VoIP services comes a wide array of policy 

issues that this subcommittee will need to consider and ultimately 

decide on as we revisit our telecommunications laws. 

What comes to mind first and foremost is if, how, or when should 

web services be regulated, specifically, whether VoIP should contribute to the Universal Service Fund and whether they should be 

required to pay access charges to local exchange carriers to originate or terminate long distance calls as long distance carriers currently do. 

Another facet we must consider is the public safety impact, how 

VoIP services will develop E-911 capability, and whether current 

laws enabling law enforcement to intercept and gather call information will apply to VoIP services are two important issues we 

must discuss. 

I thank you again, Mr. Chairman Upton, for providing another 

opportunity for this subcommittee to discuss, learn, and debate the 

impact and future of IP-enabled services, and I look forward to 

hearing the perspectives of the witnesses before us today. 

I yield back. 

Mr. UPTON. Thank you. 

Mr. Inslee. 

Mr. INSLEE. I will waive. 

Mr. UPTON. Mr. Wynn. 

Mr. WYNN. I will waive, also. 

Mr. UPTON. Mr. Whitfield. 

Mr. WHITFIELD. I will waive. 

Mr. UPTON. Well, thank you. Thank you all for your testimony. 

At this point, we will move to our witness list. We appreciate——

Mr. WALDEN. Mr. Chairman. 

14

Mr. UPTON. Oh, oh. Mr. Walden is recognized for an opening 

statement. 

Mr. WALDEN. Thank you, Mr. Chairman. I will make it real brief, 

because they—a lot of these issues have been covered, but I am 

looking forward to hearing from our witnesses on a number of 

fronts, including reliability of VoIP, especially in emergencies, how 

we are going to deal with USF issues and payment into USF. Online security issues with VoIP, do we face the same kind of hacking 

issues there that we see with other computer programs for identity 

theft and all. Interconnection issues, what happens if VoIP is determined an info service versus a telecommunication service? These 

issues are consumer—ability to fight back, frankly, when there are 

multiple entities involved in connecting your phone, how do we get 

around the blame game that can occur, has occurred? I have seen 

it in my own business, in other areas, and it is something I think 

consumers have a definite need to be able to turn somewhere to get 

relief. And finally, the intercarrier compensation issue are all that 

I think are important. 

Mr. Chairman, I appreciate your holding this hearing, and I will 

sum it up with that. 

Mr. UPTON. We have a place for you up here if you would like 

to move. 

Mr. WALDEN. No, it is fine. 

Mr. UPTON. All right. 

Mr. WALDEN. Closer to the action here, Mr. Chairman. 

Mr. UPTON. You are not going to be able to see that placard. 

Well, at this point, opening statements are concluded, and I will 

make unanimous consent that all members not present at the moment are able to insert their statements as part of the record. 

[Additional statements submitted for the record follow:]

PREPARED STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF FLORIDA

Mr. Chairman, thank you for holding this hearing on Voice-over Internet Protocol, 

a technology that promises to give American consumers more choices and cheaper 

services. 

Obviously, the treatment of these IP services will be a key area of focus for us 

as we revisit the 1996 Telecom Act, and it’s critical that we get it done right. This 

is especially true when it comes to Internet telephony. 

Thousands of Americans are signing up to use VoIP services each week, and the 

number of users has nearly tripled over the last three years. According to estimates, 

there will be between 17-20 million VoIP subcribers by 2008. The recent news that 

several prominent companies will start providing VoIP services for their customers 

should only help speed along these numbers. 

Imagine how much more explosive this growth will become once we are able to 

expand broadband deployment and establish a national framework that provides 

legal and regulatory certainty in this arena. 

That’s why I was pleased to recently introduce legislation with my colleague from 

Virginia, Congressman Boucher, which proposes to provide an interstate framework 

of certainty not just for voice services, but also for video, data, high-speed services 

and whatever IP services that may come along in the future. 

Five or ten years ago, it wasn’t readily apparent that VoIP would be the killer 

application that it is today. We still don’t fully know what other IP applications will 

be the ‘‘next big thing’’ down the road. As such, we might want to consider an approach that applies to IP-enabled services in general rather than each individual application, so that this innovative technology can be allowed to grow and flourish. 

So our point would be, as we take another look at our telecommunications laws, 

why shouldn’t we make it as flexible and as anticipatory as we possibly can? The 

fact is that VOIP and other IP services are revolutionizing the telecommunications 

landscape, and we should think about modernizing our laws to face this reality. 

15

Maybe the conventional way of thinking isn’t adequate. These are the type of questions that I hope to hear about in this hearing and the others to come. 

Mr. Chairman, thank you for holding this hearing, and I am looking forward to 

hearing from the witnesses that we have here today, because they are the ones who 

are dealing with this emerging technology every day. 

PREPARED STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF WYOMING

Thank you, Mr. Chairman. 

I’m pleased the Committee is continuing to examine how Internet Protocol (IP)-

enabled services are changing the landscape of communications, today and in the 

not-too-distant future. The use of ‘‘information packets’’ has profoundly affected how 

we communicate, and will soon affect a wide array of advanced services. 

This requires that Congress look at the legacy regulations that are crumbling 

under our feet as these technologies emerge, and act proactively to ensure all consumers—even those in the most remote corner of Wyoming—are served. I am one 

who believes in the promise of IP and how it can improve the choice and rich selection of competitive services for consumers. 

Still, we need to ensure that innovation is rewarded. We need to ensure that the 

infrastructure is ubiquitous. And we need to ensure that one platform is not favored 

over another. 

The lines between voice, video and data communications will soon be a memory. 

The challenge for Congress as we tackle changes to this nearly 10-year old law, is 

to ensure that those of us in rural America are not left using 19th Century technology in a 21st Century world, and that in so doing, we not crush innovations with 

oppressive restrictions. 

I look forward to hearing from our distinguished panel on these matters Today 

and want to continue our dialog as we tackle legislation addressing these matters. 

I yield back the balance of my time. 

PREPARED STATEMENT OF HON. ELIOT ENGEL, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF NEW YORK

Mr. Chairman: Thank you for recognizing me and thank you for holding this hearing. 

I understand that members of the John family from Houston are in the audience. 

I want to express my sympathies for the pain your family has endured. I also want 

you to know that as we move forward I am personally pledged to ensure that every 

company that provides voice telephone services WILL be compatible with 911. PERIOD. 

Mr. Chairman, we have much work to do this year if we are to write a comprehensive bill that provides the clear, level playing field to all players in this great industry. 

The need for a more comprehensive rewrite versus a limited one is exemplified 

by the number one issue we all agree on—regardless of party or where we come 

from—911 compatibility. 

One of the companies before us today, Cablevision, which provides services to 

about 90% of my district, is fully compatible with the 911 systems with their VOIP 

service. They accomplish this by handing off all their calls to a CLEC, who then 

transfers these calls throughout the POTS—plain old telephone system. 

I applaud Cablevision for their efforts. They are serving as an example of a VOIP 

provider doing the right thing. 

However, the Chairman of the full Committee, as an engineer himself, might not 

be as appreciative because they have chosen a solution that is not elegant. 

Engineers are always looking for an elegant solution. (PAUSE) But, we in Congress make sausage!!! 

I would argue that to solve what are more regulatory problems than technical 

problems, Cablevision has set up its CLEC so that it would have a clear framework 

in law and regulation to operate within. In terms of compliance with 911, this provides an interconnect guarantee. However, if they were just a VOIP provider, they 

would not enjoy the benefit of a right to interconnect. 

Thus, we in Congress expect and will soon legislate that VOIP be 911 compatible. 

But, right now they do not have the legal right to fulfill this responsibility. 

Yet I believe the elegant solution would be that Cablevision as a company could 

be providing a suite of ‘‘communications services’’ and not have to create subsidiaries to assist. 

16

In fact, whether it is a cable, satellite or traditional telephone company—all are 

able to provide voice, video and data communication services. 

We should provide a regulatory framework for the delivery of like services—not 

a different framework based on how those services are delivered to the consumer. 

I look forward to hearing the testimony from these witnesses. 

PREPARED STATEMENT OF HON. BART GORDON, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF TENNESSEE

Thank you Mr. Chairman, 

Telephones plays a unique and critical role in our society. Simply put, consumers 

rely on them to call for help. 

If public safety obligations should apply to new IP enabled telephony services, and 

I believe there is consensus that they should, then these new services also should 

have the right to fully access the existing 911 system. 

I am working on legislation to clear those policy barriers that can be cleared at 

the federal level to make sure that all IP enabled telephony providers can provide 

basic 911 callback number and location information services as quickly as possible. 

This provides a competitive level playing field and is essential if IP enabled phone 

services are to be widely accepted by consumers as replacement for their traditional 

phone service. 

Going forward, the new technologies hold the potential of providing better 911 

services. For example, eventually a caller may be able to alert a 911 call center that 

they are Spanish speaking so translator services can be arranged. The good news, 

911 deployments in the past, the equipment manufacturers, telephone providers and 

the 911 industry are working together on next generation of 911 deployment. 

I look forward to the testimony of the witnesses on this issue.

Mr. UPTON. Witnesses, we appreciate your submitting your testimony in advance, so we were able to look through it last night. At 

this point, we are joined by the following witnesses: Mr. Paul 

Erickson, Chairman of SunRocket; Mr. Carl Grivner, CEO of XO 

Communications; Mr. John Melcher, Executive Director of the 

Greater Harris County 911 Emergency Network; Ms. Karen 

Puckett, President and COO of CenturyTel; Mr. Thomas Rutledge, 

COO of Cablevision, no questions about the Knicks today, I want 

you to know; and Mr. Mark Shlanta, CEO of the South Dakota 

Network Communications. We welcome all of you, and we would 

like you to limit your remarks to no more than 5 minutes. Your testimony is made part of the record in its entirety. 

I will warn you in advance that we are expecting a series of votes 

momentarily, so we will have to break at such a point and return, 

but Mr. Erickson, we will start with you. Welcome. 

You need to hit the mike button as well right there. 

STATEMENTS OF PAUL ERICKSON, CHAIRMAN, SUNROCKET; 

CARL J. GRIVNER, CHIEF EXECUTIVE OFFICER; XO COMMUNICATIONS; JOHN MELCHER, EXECUTIVE DIRECTOR, 

GREATER HARRIS COUNTY, 911 EMERGENCY NETWORK; 

KAREN PUCKETT, PRESIDENT, CHIEF OPERATING OFFICER, 

CENTURYTEL, INC.; THOMAS M. RUTLEDGE, CHIEF OPERATING OFFICER, CABLEVISION SYSTEMS CORPORATION; 

AND MARK SHLANTA, CHIEF EXECUTIVE OFFICER, SOUTH 

DAKOTA NETWORK COMMUNICATIONS 

Mr. ERICKSON. Thank you, Mr. Chairman, and members of the 

committee for inviting me to speak before you this morning. My 

name is Paul Erickson, and I am the Chairman and Co-Founder of 

SunRocket, an Internet phone company based in Vienna, Virginia. 

Not long ago, it would have been impossible to create a nationwide, residential phone company due to the cost and complexity of 

17

securing rights of way and building local networks reaching into 

American neighborhoods. Now with the surging broadband adoption and the wonders of Internet telephony, we can create a highquality, far-reaching phone service that sets new standards in 

functionality and value. In less than a year, with a handful of employees, we built SunRocket from a blueprint into a coast-to-coast 

service provider, with thousands of satisfied customers across 38 

States. We offer a full year of home phone service for a flat rate 

of $199, including unlimited local and long distance calling, a bucket of free international minutes, a free extra phone number, emergency 911 calling, over a dozen free enhanced calling features plus 

all of the necessary equipment you need at no extra charge. That 

is the kind of value and innovation that Voice-over IP technology 

has made possible. 

Our topic today is to discuss how public policy can enable and 

unleash the potential of Voice-over IP technology while making certain that consumers are protected, that competition is fair and vigorous, and that public safety is ensured. We can agree on the goals, 

but the best policy approach to reach those goals depends on your 

vantagepoint. Contrary to what some people think, not all Internet 

phone companies are looking for a free ride or to avoid social and 

civic responsibilities. At SunRocket, we believe that prudent regulation is a very good thing. We believe that States should have an 

active role in fostering competition and protecting their citizens. 

We believe that phone companies, whether old or new, regardless 

of their underlying technology, have certain responsibilities to ensure public safety and universal connectivity. We believe that these 

things can be achieved without burdensome or oppressive regulation or taxation. 

My hope is that we can agree that our first priority is to ensure 

that consumers get what they expect and what they deserve. Primarily, they want a choice in providers. They recognize that fair 

competition is the best way to foster innovation, low prices, reliable 

quality, and responsive service. The option to switch from company 

A to company B without hassles, penalties, or risk is by far the 

best way to force companies to behave in the best interest of their 

customers. However, Americans do not believe that a choice between their legacy cable and phone companies qualifies as sufficient competition for home phone service. We recently completed a 

pole of over 2,000 Americans, asking them what they wanted from 

phone and broadband services and what they believed about the 

competition in the category. Only 10 percent of them stated that 

a choice between the phone and cable company for home phone 

service represent a sufficient competition. 

From a consumer standpoint, fairer phone competition requires 

only a few basic things. Consumers don’t care about things like 

intercarrier compensation, subsidies, or cost recoveries, but they do 

care about their phone number. If they want to switch phone companies, they want their phone number to transfer flawlessly, immediately, with no effort on their part. Today, the process of moving 

a phone number from an incumbent phone company to an Internet 

phone company can take weeks if it can be done at all. 

Fairer competition also means that they can switch phone companies without facing outages and inconveniences associated with 

18

other household services that they rely on. That is often not the 

case today. In fact, in most areas, if a DSL customer wants to 

switch to Internet phone service, they are forced to go through the 

hassle of canceling their DSL service and installing cable 

broadband service. 

For the promises of Internet-enabled services to be fully realized, 

we also believe that proactive policy action to ensure net neutrality 

is essential. Today, consumers have rarely been subjected to deliberate interference, disruption, or blocking of Internet-enabled content and applications, and they are extremely passionate about 

keeping it that way. In the recent consumer poll I described earlier, 

97 percent of those voicing an opinion on this subject said that 

broadband providers should not be allowed to control what they access over the Internet other than to protect them from potentially 

harmful computer viruses and block illegal activities. Rarely do 

consumers so universally agree on any subject, which should give 

this committee sufficient reason to act on this point. 

Another critical issue was emergency 911 calling. SunRocket has 

worked to provide our customers with the best 911 service that we 

could profitably provide. Unlike some other Internet phone companies, the majority of SunRocket customers are enabled with enhanced 911 calling, which automatically delivers the name and location information to emergency operators, and we are working to 

extend that capability to all of our customers as fast as we can. We 

would welcome assistance from policymakers in enabling Internet 

phone companies to get fair, efficient, and economic access to the 

existing emergency 911 infrastructure, and I believe it would be 

prudent to support investments to upgrade that infrastructure to 

allow emergency call centers to benefit from enhanced IP-enabled 

services. Given the criticality of 911 calling and to ensure that 

Internet phone service reaches its full potential, SunRocket supports a requirement that all phone companies will issue standard 

phone numbers and offer the capability to place outgoing phone 

calls using standard telephones and must also provide 911 service 

as long as all phone companies have efficient and effective access 

to the existing 911 infrastructure. 

In conclusion, SunRocket remains committed to bringing Internet 

phone service to mainstream consumers, and we feel that part of 

the role of a consumer champion is to advocate sound public policies and ensure the health and future of Internet phone service in 

a regulatory environment that protects and advances the social 

goals of our country. 

I applaud the efforts of this committee to ensure vibrant competition, foster innovation, and protect consumers. 

Thank you again for the opportunity to speak with you today. 

[The prepared statement of Paul Erickson follows:]

PREPARED STATEMENT OF PAUL ERICKSON, CHAIRMAN AND CO-FOUNDER, SUNROCKET

Thank you, Mr. Chairman and members of the Committee for inviting me to 

speak before you this morning. My name is Paul Erickson, and I am the Chairman 

and co-founder of SunRocket, an Internet phone service provider based in Vienna, 

Virginia. Prior to creating SunRocket, I spent 16 years with MCI in marketing and 

business strategy roles, and I have a great appreciation for the role that policies and 

regulation play in fostering competitive markets and consumer value and protection. 

My career in this industry began prior to the Bell System break-up, and I’ve lived 

19

through equal access implementation and the creation of long distance competition, 

the emergence of wireless and the Internet, and the reshaping of the global telecom 

industry. Along the way, I designed services that capitalized on changing economics 

and regulation, that brought competition to toll-free and collect calling, international 

long distance and local phone service. I recognize how the pieces fit together in this 

industry, and the enormous potential of the Internet to improve, disrupt and transform how we live, work and play. I admire and applaud the efforts of this committee 

to shape the policies that will ensure vibrant competition, foster innovation and protect consumers. 

Internet phone service has been the subject of much debate, discussion, attention, 

and sometimes, downright hype, over the past year. We’ve read countless articles 

on how the technology is revolutionizing communications, changing the way we 

work and live, and bringing a generation of Internet users into an IP enabled world. 

And by the way, all of this is true. 

Not long ago it would have been impossible to create a nationwide residential 

phone company, due to the cost and complexity of securing rights of way and building local networks reaching into American neighborhoods. Now with surging 

broadband adoption and the wonders of Internet telephony, we can create a highquality, far-reaching phone service that is better than anything that’s out there from 

a feature, price and value perspective. In less than a year with just a handful of 

employees, we built SunRocket from a blueprint into coast-to-coast service provider, 

with thousands of satisfied customers across 38 states. Our customers pay a flat 

rate of $199 for an entire year of a phone service. And that doesn’t just include unlimited local and long distance calling. For SunRocket customers, it also means a 

bucket of free international minutes, a free extra phone number, emergency 911 

calling, over a dozen free enhanced calling features, all the necessary equipment you 

need at no extra charge, and just in case, a 31 day risk-free guarantee. That’s the 

kind of value and innovation that Internet telephony has made possible. 

We look at Voice-over-IP as simply an enabling technology, albeit a 

groundbreaking one. But for us, SunRocket isn’t about technology. It’s about creating a far better phone company, one that delivers phone service to customers the 

way they deserve to get it. Innovative features that give consumers more control 

over how they can stay in contact with others, and filter out unwanted contacts. 

Straightforward pricing that eliminates phone bill confusion and saves them money. 

The technology, economics, and policy climate for Voice-over-IP finally reached the 

stage where it is ready for prime time, and we were ready for it. 

I realize we are not here today to discuss the tremendous benefits of Voice-overIP technology, as most of us already agree on that. Our challenge is to figure out 

how public policy fits into this brave new world, how it can enable and unleash the 

potential of the technology, while making certain that consumers are protected, that 

competition is fair and vigorous, and that public safety is ensured. We can agree 

on the goals, but the best policy approach to reach those goals depends on your vantage point. 

I think we can all agree that no matter where you stand—on the incumbent or 

new entrant side of the aisle—telecom policy is not so black and white anymore. I 

don’t think any of us want to retrofit Internet phone service into the existing regulatory scheme we’ve fought over for years. Even if we tried, the technology simply 

does not allow it. 

Contrary to what some people think, not all Internet phone companies are looking 

for a free ride or to avoid social and civic responsibilities. At SunRocket, we believe 

that prudent regulation is a good thing. We believe that states should have an active role in fostering competition and protecting their citizens. We believe that 

phone companies, whether old or new, regardless of their underlying technology, 

have certain responsibilities to ensure public safety and universal connectivity. We 

believe that these things can be achieved without burdensome or oppressive regulation or taxation. 

My hope is that we can agree that our first priority is to ensure that consumers 

get what they expect and deserve. Having managed consumer research in this category for over a decade, this comes down to just a few simple imperatives. 

First, they want a choice in providers. They recognize the fair competition is the 

best way to foster innovation, low prices, reliable quality, and responsive service. 

The option to switch from company A to company B, without hassles, penalties, or 

risk, is by far the best way to force companies to behave in the best interests of 

their customers. Furthermore, Americans do not believe that a choice between their 

existing phone and cable companies for phone service qualifies as sufficient competition. We recently completed a poll of over 2,000 Americans, asking them what they 

wanted in phone and broadband service, and what they believed about the competition in the category. Only 10% of them stated that a choice between the phone comVerDate 0ct 09 2002 14:37 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6621 F:\DOCS\20745.TXT HCOM1 PsN: JOEP
20

pany and the cable company for home phone service was sufficient competition. 

Three-quarters of those voicing an opinion said that we need many competitors for 

home phone service, since that will result in the best service at the best prices. 

The second thing that consumers expect is that phone companies will provide the 

basics that they’ve come to expect from home phone service. They expect it to work, 

reliably, 24 by 7. They expect to be able to call any phone in the world by dialing 

a regular phone number. They expect 911 to reach an emergency operator, 411 to 

reach directory assistance, and toll-free numbers to be toll-free. They expect to be 

able to block telemarketers from hassling them. They expect their bills to be clear 

and accurate. They don’t need to know how all this works. They just want it to 

work. 

Finally, like all taxpayers, they want some relief from the burden of taxes, fees, and surcharges that turn an advertised $49 phone plan into a $65 monthly bill. Of 

course, they also recognize that taxes are a fact of life—but they would like some 

way to make sense of it all, to be able to compare prices between competitors and 

to feel comfortable that they’re getting what they paid for or paying for what they 

requested. 

If we focus on those few things from a policy standpoint, I believe we can make 

a huge leap forward to create a fiercely-competitive yet profitable, innovative yet reliable, telecommunications industry. Of course, the key is enabling fair competition, 

so that consumers can easily switch from an underperforming provider to an alternative that offers a better combination of features, quality, value and behavior. 

From a consumer standpoint, fair phone competition requires only a few basic 

things. They don’t care about things like intercarrier compensation, subsidies, carrier profits, cost recoveries or details of how calls are routed from Boston to Botswana. But they do care about their phone number. If they want to switch phone 

companies, they want their phone number to transfer, flawlessly, immediately, with 

no effort on their part. Today, the process of moving a phone number from an incumbent phone company to an Internet phone company can take weeks, if it can 

be done at all. We believe that phone numbers should be controlled by the customer, 

and that no phone company has the right to hold those numbers hostage for any 

reason. From a consumer standpoint, fair competition also means that they can switch 

phone companies without facing outages or inconveniences associated with other 

household services. That is often not the case today. In most areas, incumbent 

phone companies don’t let their DSL customers keep their broadband, cancel their 

phone service and transfer their phone number to an Internet phone company. In 

order to switch to an Internet phone company, DSL customers have to go through 

the hassle of canceling DSL and installing cable modem service. It’s easy to imagine 

broadband providers creating anti-competitive pricing structures to restrict adoption 

of Internet-enabled services, and many broadband providers are already engaged in 

the practice, charging huge price premiums for standalone broadband service. These 

practices impede the kind of competition that consumers are asking for. 

For the promises of Internet-enabled services to be fully realized, we believe 

proactive policy action to ensure Net Neutrality is essential. To date, consumers 

have rarely been subjected to deliberate interference, disruption, or blocking of 

Internet-enabled content and applications, and they are extremely passionate about 

keeping it that way. In the recent consumer poll I described earlier, only 3% of 

Americans think that broadband providers should be allowed to block access to services and websites that compete against that company’s services. 97% of those voicing 

an opinion said that broadband providers should not be allowed to control what they 

access over the Internet, other than to protect them from potentially harmful computer viruses or block illegal activities. Rarely do consumers so universally agree 

on any subject, which should give this committee sufficient reason to act on this 

point. Failure to do so could enable broadband providers to block Internet-enabled 

video, voice and information services, which would impede the vigorous competition 

desired by consumers and policymakers alike. There is no justification for 

broadband providers to engage in tactics that deliberately impede independent providers of voice, video and content services. 

I mentioned earlier that consumers expect certain things from their phone company. Perhaps the most critical expectation is emergency 911 calling. While Internet 

phone companies are making some progress on this front, policymakers can play an 

important role in ensuring consumer safety. SunRocket has worked hard, at significant expense, to provide our customers with the best 911 service that we can profitably provide. Unlike with some other Internet phone companies, the majority of 

SunRocket customers are enabled with enhanced 911 calling, which automatically 

delivers the name and location information to the emergency operators, and we are 

working to extend that capability to all of our customers as fast as we can. All of 

21

our customers have access to some form of 911 calling, though in some areas we 

can’t automatically deliver location information with the call. While the inherent 

mobility of Internet phone service creates challenges to properly maintain correct 

address information, this can be accomplished in a number of ways. We would welcome assistance from policymakers in enabling Internet phone companies to get fair, 

efficient, and economic access to the existing emergency 911 infrastructure, and believe it would be prudent to support investments to upgrade that infrastructure to 

allow emergency call centers to benefit from enhanced IP-enabled services. 

Given the criticality of 911 calling and to ensure that Internet phone service 

reaches its full potential, SunRocket would support a requirement that all phone 

companies who issue standard phone numbers and offer the capability to place outgoing phone calls using standard telephones must also provide 911 service, as long 

as all phone companies have efficient and effective access to the existing 911 infrastructure. Short of that, for the benefit and safety of consumers, at a minimum 

there should be a mandate that all Voice-over-IP providers who do not provide E911 

fully disclose that to their customers in an obvious and transparent manner. 

Finally, I would like to offer our views on a few other topics that often are included in policy debates related to Internet phone service. As I mentioned earlier, 

SunRocket does not expect a free ride. All Internet phone companies would agree 

that fair compensation is required for the exchange of traffic between networks. The 

ongoing debate over access charges mostly centers on whether the remaining subsidies baked into access charges should be extended to Internet phone traffic. A better question is how these subsidies can be removed from all intercarrier compensation mechanisms. As you know, this debate has raged for years at the FCC, and 

we can’t solve this here, though a rational and efficient peering system should be 

the policy goal. 

A related topic is reform of the Universal Service Fund program. Again the jurisdictional and economic issues are complex, but SunRocket supports the policy goal 

of universal access to phone service, and believe that the policy goal should be extended to residential high-speed Internet access as well. In fact, we believe that the 

universal service goal should increasingly be directed toward securing universal 

adoption of residential high-speed Internet access and less on maintaining subsidies 

for legacy telephone services. 

The big questions are how to fund the program, what level of support is necessary, and what companies are able to access the funds. In 2003, over $3 billion 

was distributed in high-cost and low-income support. That same year, FCC reports 

show nearly $300 billion in industry-wide revenue from wireless and wireline telecommunications. While perhaps I have a simplistic view of the situation given jurisdictional revenue separations and statute service definitions, but it seems like a 1% 

Universal Service Surcharge applied to all telephone and ISP revenue would fully 

fund that program. Under that kind of mechanism, the revenue base is broadened 

and certain types of customers no longer bear a disproportionate amount of the 

costs. The system would define the minimum level of service, and any carrier who 

qualifies would be eligible. 

In conclusion, clearly we have a lot of work to do, but I am confident we are all 

up to the task. SunRocket remains committed to bringing Internet phone service to 

the mainstream consumer and we feel that part of the role of a consumer champion 

is to advocate sound public policies that ensure the health and future of VoIP and 

regulatory environment that protects and advances the social goals of our country. 

We look forward to working with you, and again thank you for the opportunity to 

talk with you today.

Mr. UPTON. Thank you. 

Mr. Grivner. 

STATEMENT OF CARL J. GRIVNER 

Mr. GRIVNER. Chairman Upton, Ranking Member Markey, and 

members of the subcommittee, thank you for the opportunity to testify today regarding Internet Protocol-enabled services and their effect on the voice marketplace. My name is Carl Grivner, and I am 

CEO of XO Communications, one of the Nation’s largest facilitiesbased providers of telecommunication and broadband services. 

Originally formed as Nextlink in 1996, XO is headquartered in 

Reston, Virginia, with 5,000 employees nationwide, has expanded 

its telecommunication offerings from its original 4 small markets to 

22

70 metro markets in 26 States today. Our company provides a comprehensive array of voice and data telecommunication services to 

small, medium, and large businesses serving nearly 200,000 business customers. XO facilities and services have enabled us to develop into the only true national-local exchange carrier. We have 

invested heavily in building our own facilities, spending over $8 billion and constructing over 1.1 million miles of fiber. We have an 

extensive set of metro fiber rings to connect customers to our network, and we own one of the largest and most advanced IP nationwide backbones in the industry. Furthermore, XO is North America’s largest holder of fixed broadband wireless licenses covering 

the 27-gigahertz to 32-gigahertz Local Multi-point Distribution 

Service. 

XO is actively working on alternative solutions to the so-called 

last mile access. IP-enabled services, like Voice-over Internet Protocol, or VoIP, are changing the voice and data marketplace. The 

Internet’s explosive growth in recent years has focused intensive efforts worldwide on developing advanced IP-based networks and applications over existing broadband infrastructure. According to the 

FCC, roughly 32.5 million broadband lines connected homes and 

businesses to the Internet as of June 30, 2004. By 2008, residential 

and business broadband subscribers are projected to reach 57 million according to the Telecommunications Industry Association. 

As IP-based technology have advanced, so has XO. We have one 

of the largest deployments of Sonus softswitches in the country, 

which serve 44 markets and deliver more than 600 million minutes 

of customer long distance traffic each month across our IP network. 

Earlier this year, we launched a new industry-leading bundled 

Voice-over Internet Protocol solution that provides our customers 

true VoIP from origination determination over our own network 

coast-to-coast. We offer the scalability and capacity that many providers can not match in a comprehensive facilities-based offering. 

According to the market research, 12 percent of businesses used 

VoIP in 2004, up from 3 percent in 2003. With the addition of 

VoIP, we can expect that number to increase in 2005. 

As we examine telecommunications reform, it is important to 

note that companies like XO can not offer these innovative services 

without access to so called last mile bottlenecks at reasonable rates 

and on reasonable terms. XO took the intent of the 1996 act to 

heart and built its own facilities and we continue to strive to serve 

more customers entirely over our own network. However, the costs, 

bill time, and local restrictions make it economically prohibitive to 

build alternative, last mile solutions for every customer. Until we 

can provide a more efficient system that is ubiquitous, as the legacy copper lines that connect the majority of homes and businesses, 

we will continue to need access to the last mile connections. If we 

eliminate cost-based, last mile access, it is virtually guaranteed 

that such an alternative system will never develop. Restrict local 

access and you restrict innovation. 

Policy deliberations must also include an extensive discussion in 

how to apply current social obligations to IP-enabled services that 

substitute for traditional voice. XO pays a contribution to the Universal Service Fund equal to 11 percent of our interstate and international revenues. With some providers attempting to exploit the 

23

lack of clear policy on VoIP, we need to ensure that all telephone 

service providers contribute to the Universal Service Fund or something similar on the same basis without regard to arcane, regulatory classification. 

XO also supports obligations to ensure enhanced 911 services are 

available and accessible at all times, regardless of the provider. 

Providers of IP-enabled services must also look at providing access 

for the disabled. In addition, given the current national security environment in which we find ourselves, CALEA obligations are vital 

for law enforcement and homeland security. Finally, a just intercarrier compensation scheme is necessary to ensure no one provider 

is either overburdened or riding free with these services. If the 

local exchange facilities are accessed, compensation should be due. 

It is important that any legislation that seeks to amend significant portions of the 1996 act protect the underlying provisions that 

brought competition to the marketplace and in turn led to the innovations that we see today. 

We look forward to working with the subcommittee on these 

issues, and I am happy to answer any questions. 

Thank you. 

[The prepared statement of Carl J. Grivner follows:]

PREPARED STATEMENT OF CARL J. GRIVNER, CHIEF EXECUTIVE OFFICER, XO 

COMMUNICATIONS, INC. 

Chairman Upton, Ranking Member Markey, and Members of the Subcommittee; 

thank you for the opportunity to testify today regarding Internet Protocol Enabled 

Services and their affect on the voice marketplace. My name is Carl Grivner and 

I am CEO of XO Communications, one of the Nation’s largest facilities-based providers of telecommunications and broadband services. Prior to joining XO as CEO 

in 2003, I served as Chief Operating Officer for Global Crossing and held various 

positions at telecommunications companies including Worldport, Cable & Wireless, 

and Ameritech. 

Originally formed as Nextlink in 1996, XO has expanded its telecommunications 

offerings from its original 4 small markets to 70 metro area markets in 26 states 

today. Our company provides a comprehensive array of voice and data telecommunications services to small, medium, and large business customers. Our voice services 

include local and long distance services, both bundled and standalone, other voicerelated services such as conferencing, domestic and international toll free services 

and voicemail, and transactions processing services for prepaid calling cards. XO 

data services include Internet access, private data networking, including dedicated 

transmission capacity on our networks, virtual private network services, Ethernet 

services, and web hosting services. XO is not your average CLEC. In fact, we really 

don’t view ourselves as such. XO’s facilities and services have enabled us to develop 

into a National LEC. We are in the business of building the physical infrastructure 

this country needs in order to benefit from the extraordinary innovations that are 

transforming the way we communicate. XO has invested heavily in building its own 

facilities spending over $8 billion and constructing over 1.1 million miles of fiber. 

We have an extensive set of metro fiber rings to connect customers to our network, 

and we own one of the highest capacity and scalable IP backbones in the industry, 

capable of delivering data end-to-end throughout the United States at speeds up to 

10 Gigabits per second. In building our networks, we have overcome obstacles city 

block by city block and office building by office building. Where the networks of yesterday use copper, we have installed fiber. Where the networks of yesterday use circuit switches, we have installed soft switches, optical switches, and the most efficient multiplexing technology. Finally, where landline network facilities are too expensive, we have invested heavily in wireless. XO is North America’s largest holder 

of fixed broadband wireless licenses, covering the 27 GHz-32 GHz Local Multi-point 

Distribution Service, or LMDS spectrum. 

24

1See Federal Communications Commission Report on High-Speed Internet Access Services, December 2004. 

IP ENABLED SERVICES

IP Enabled Services are, indeed, changing the voice and data marketplace. The 

Internet’s explosive growth in recent years has focused intensive efforts worldwide 

on developing IP-based networks and applications. According to the Federal Communications Commission (FCC), roughly 32.5 million broadband lines connected 

homes and businesses to the internet as of June 30, 2004.1

Over the past few years IP-based technologies have undergone rapid innovation. 

Many of these innovations have the effect of increasing the efficiency of the physical 

components of our network by increasing the effective capacity of networks for these 

types of applications. We believe that IP-based technologies will serve as the foundation of integrated networks that treat all transmissions—including voice, fax and 

video—simply as applications carried over an integrated transmission facility. Although not always the case, voice over IP, or VoIP, technology usually incorporates 

the quality of service necessary for commercial deployments and is increasingly 

price-competitive in terms of the equipment that is installed at the customer’s premises. We expect that, over time, improved technology and the manufacture of sufficient volumes of equipment will make customer adoption of VoIP applications more 

prevalent. 

XO recognized the value of IP-based technologies early on. We have invested a 

significant amount in this area. In fact, IP-based technologies are the single strongest pillar for the future of our company. As I mentioned earlier, we have deployed 

a large number of newly-developed packet-based switching technologies, including 

soft switch, optical and Ethernet switching. The soft-switch is a distributed computer system that performs similar functions to a circuit switch, but more efficiently. It can route and switch information at an extremely fast rate. In 2000, we 

began deploying softswitch technologies from Sonus Networks. Today, we have one 

of the largest deployments of Sonus softswitches in the country. Our softswitches 

serve forty-four markets and deliver more than 600 million minutes of customer 

long distance traffic each month across our national IP network. 

Earlier this year, XO launched a new industry-leading bundled voice over Internet 

Protocol (VoIP) solution that will give business customers in Boston, New York City, 

Washington DC, and Baltimore enhanced features, functionality and value for their 

voice and Internet services. Full nationwide availability is expected by mid-April. 

This service, called XOptions Flex is an integrated voice and data service delivered 

to a customer over one converged facility, providing for one invoice from one proven 

supplier with one point of accountability. XOptions Flex will be available for a flat 

monthly price and include over twenty standard voice applications and features for 

each phone line and offer dedicated Internet access up to 3 Mbps. The service allows 

for what is called Dynamic Bandwidth Allocation which allows customers to maximize the utilization of a T1 circuit by allocating bandwidth to data applications 

while voice lines are idle; in this case, voice will always have priority. This is very 

different from TDM applications that require the user to fix the bandwidth either 

for voice, or for data. In addition, this service will allow customers to make realtime changes to their services configuration. We are truly empowering end users to 

design and use their own services in a manner that has never been possible before. 

Though overall pricing for VoIP offerings is comparable across the business market, we offer capabilities that other providers do not. First, we offer a true VoIP solution. Rather than simply providing IP based transport between traditional phones, 

or taking an IP signal only up to the switch, we enable our customers to experience 

true VoIP from origination to termination. Second, we provide these services over 

our own local networks and over our advanced internet backbone. This gives us the 

scalability needed to continue to increase future offerings without significant bandwidth constraints. Further investment in compression technologies will bolster that 

ability. Third, we are nationwide, enabling coast-to-coast communication for our 

business customers. 

From our perspective, this is only the beginning for VoIP and IP-enabled services. 

XO plans to continue to broaden its IP-based product portfolio this year and next 

to bring the benefits VoIP has to offer to an even larger market. We will build upon 

XOptions Flex to deliver enhanced features to larger and distribution organizations. 

As mentioned earlier, we expect customer adoption of VoIP applications to continue; 

especially as the quality of services offered increase and the costs of providing these 

services decrease. In 2004, the number of US business using VoIP grew to 12 perVerDate 0ct 09 2002 14:37 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6621 F:\DOCS\20745.TXT HCOM1 PsN: JOEP
25

2See ‘‘Business VoIP: An End-User’s Perspective, 2004’’ (December 7, 2004). In-Stat/MDR 

cent, a substantial increase from just 3 percent in 2003.2 We expect that to continue. 

VOIP REGULATORY POLICIES

It is important to note that companies like XO cannot offer these innovative services without access to so-called ‘‘last mile’’ bottlenecks. This is not because we would 

rather piggyback our services over someone else’s lines, on the contrary, we prefer 

to provide services over networks that we own and control. And we have demonstrated that preference consistently; given the billions of dollars we have invested 

in our own infrastructure make that abundantly clear. 

Unfortunately, the bandwidth requirements of most of our customers are moderate. We serve the long-neglected small and medium-sized businesses and the revenue opportunities associated with these types of customers are simply not large 

enough to justify construction of redundant loops. Moreover, building another connection to a customer building runs into a number of problems. 

First is cost. A 500 ft ‘‘lateral’’ connection from an XO fiber ring to a customer 

building can cost at least a quarter of a million dollars, and that is if everything 

goes perfectly. 

Second is time. It can take as long as 6 months to build another line to a customer building. Very few businesses are willing to wait that long for service. 

The Third problem is local restrictions. The building owner may refuse to allow 

another line to connect to the premises. In addition, various municipalities can place 

restrictions on when and how you can construct a building connection. 

In light of these inherent obstacles within the competitive industry, companies 

like XO are forced to lease many of these legacy ‘‘last mile’’ loops. This issue of loop 

access brings me to the discussion of what the public policy objectives should be in 

addressing VoIP. In the context of examining our telecommunications laws, I have 

heard two reoccurring comments from Members of Congress: the desire to (1) encourage and bolster facilities-based competition; and (2) maintain some form of regulatory certainty. 

XO agrees both points. We took the intent of the 1996 Act to heart and built our 

own facilities to compete. We continue to invest and build and we are actively 

pursing alternatives to ‘‘last mile’’ access through our broadband wireless licenses. 

On the second point, regulatory certainty is desirable for all industry participants 

in order to bring additional investment and growth to the sector; however, it depends on exactly what you mean by regulatory certainty. We don’t believe that regulatory certainty should mean eliminating current access requirements for incumbent 

telecommunications providers solely because IP based technologies are used. In fact, 

the same copper based T-1 lines that provide traditional voice are also used to provide VoIP services. 

It is imperative that these policy goals be pursued in light of the specific circumstances of the telecommunications industry. considers public policy toward VoIP 

and its goals of encouraging investment and reducing regulation, it is important to 

keep in mind that the ‘‘marketplace’’ involves more than just residential telephone 

service. Most telecommunications discussions regarding regulation of IP-based services center around the looming ‘‘battle of the titans’’ between cable company facilities used for broadband and voice vs. telephone company DSL broadband and voice 

(as well as eventually video) in the residential market. In my opinion, this focus on 

the residential market is the primary driver behind the call for ‘‘regulatory parity’’. 

But, I must caution that policy makers keep in mind that two distinct types of 

markets exist in the telecommunications world: the residential market and the business markets. It is very difficult to apply broad regulatory principles based on one 

vision of the marketplace. It may or may not be wise to rely on the presence of cable 

companies in the residential market as an adequate constraint on ILEC market 

power. But cable companies cannot be relied upon to bring competition to the business markets, because, as the FCC recently concluded, cable companies generally 

do not compete in the business market. Thus, to accept a duopoly as an inevitable 

‘‘better than nothing’’ version of competition in the residential market, without engaging in a separate view of the business markets, will ultimately doom healthy 

competition in the business market. 

XO Communications provides the perfect example of my point. We are a robust 

competitor investing billions of dollars in our network, creating jobs and consumer 

benefits in the process. XO focuses this investment on competing with the telephone 

companies in the business markets, not the residential market. In truth, the vast 

bulk of telecommunications usage and investment in this country is for business 

26

services. Individual consumer services are important, but it is the market for business telecommunications services that truly drives investment, growth, and innovation. Companies like XO are the key competitors in providing telecom services to 

businesses, especially the small and medium sized businesses that President Bush 

and most economists recognize to be the main sources of job creation and economic 

growth in America today. 

Everyone here recognizes that competition is the key to stable telecommunications 

policy. However, there are critical government policies that must be clearly stated 

and vigorously enforced if competition is to continue to flourish. 

Access to the so-called ‘‘last mile’’ must remain available for lease by competitors 

at reasonable rates and on reasonable terms. While XO strives to serve more customers entirely over its own network, the issues I mentioned previously (cost, build 

time, and local restrictions) make it economically prohibitive to build alternative 

‘‘last mile’’ solutions in most cases. 

I would like to make a point, however, that loop unbundling does not mean heavyhanded rate regulation. We are not a ‘‘why buy the cow, when you can get the milk 

for free’’ company. Do we believe that unbundled access should continue indefinitely? I don’t believe that is prudent for the marketplace if it becomes feasible for 

competitors to build their own loops. However, as most of the Members of the Subcommittee know, the 1996 Act provided for a transition to facilities-based competition through Unbundled Network Elements (UNE) access. We’re working tirelessly 

to get there, but until the industry can figure a way to develop a commercially viable and more efficient system than the legacy copper lines that currently connect 

virtually every residence and business, we will continue to need access to these last 

mile bottlenecks. 

This situation is not unique to the telecommunications industry. In the electricity 

industry, independent power producers must also access existing transmission facilities of incumbent providers in order to move their power to the consumer, and at 

just and reasonable rates. 

In addition, telecom policy must include an extensive discussion on how to apply 

current social obligations to IP enabled services that may substitute for traditional 

voice. Like other carriers, XO pays a contribution to the federal universal service 

fund equal to more than 10% of its interstate and international end user revenues. 

We understand the importance of universal service to our society. Today, however, 

the universal service contribution requirement has created a substantial amount of 

‘‘regulatory arbitrage’’ by providers of VoIP. Carriers attempting to gain a competitive advantage seek to exploit the lack of clear policy on the regulation of VoIP, 

which, in turn, leads to an irrational application of universal service fees to some 

and not to others. This situation should be remedied so that all telephone service 

providers contribute to the universal service fund on the same basis, without regard 

to arcane and irrational differences in their regulatory classification. 

XO also supports obligations to ensure E-911 services are available and accessible 

at all times, regardless of the provider. Providers of IP-enabled services must also 

look at providing access for the disabled. In addition, given the current national security environment in which we find ourselves, CALEA obligations are vital for law 

enforcement and homeland security. Finally, a just intercarrier compensation 

scheme is necessary to ensure no one provider is either overburdened or ‘‘riding 

free’’ when providing these services. If the facilities of a local carrier are accessed, 

compensation should be due. 

While the FCC has open proceedings and summits to work on addressing these 

issues, it is important that any legislation that seeks to amend significant portions 

of the 1996 Act consider all ramifications and provide sufficient guidance so that 

clarity, investment, competition, and innovation can continue in the telecommunications industry—bringing even more exciting and competitive products to the consumer. I know that bills have been introduced by Representative Pickering and Representatives Stearns and Boucher on this issue. I thank them for their leadership 

and willingness to highlight the exact issues that we must debate. 

Again, Mr. Chairman, I thank you for the opportunity to provide XO’s views on 

IP Enabled Services and look forward to working with the Subcommittee on these 

important issues.

Mr. UPTON. At this point, we are going to adjourn. We are actually voting on the Markey amendment, so Mr. Markey needs to 

cast his vote early on the House floor. So we are going to stop at 

this point. We have a series of votes, and I think we should be prepared to come back with Mr. Melcher as early as—we will try for 

27

11:45. It will not be before then, but we will try to come back at—

between 11:45 and 12. 

Thank you. 

[Brief recess.] 

Mr. UPTON. All my absent members promised that they were 

watching this on the TV in their office, I want you to know, but 

I think we will get started before the next wave of votes continues. 

And Mr. Melcher, we are prepared for your testimony. Thank you 

again for going along with us on our delay. 

And I would note that the Markey amendment won overwhelmingly, so he is a very happy guy. 

STATEMENT OF JOHN MELCHER 

Mr. MELCHER. Well, it is good to see you again, Mr. Chairman. 

Thanks for your time today, and my congratulations to Representative Markey. 

We also would like to extend our gratitude to Representative 

Shimkus on your committee and Representative Eshoo, as they cochair the House side of the E-911 caucus that we helped to get 

started a few years ago. Thank you for your time. 

It is a pleasure to be in front of this committee, because this 

committee is the one that really gets it. You know, our issue is one 

of those that is not highly understood by the rank and file, and this 

committee is the one who really seems to get most of the detail. 

For those who do not know me, I am John Melcher. I am the Executive Director of the Greater Harris County 911 System, which 

serves metropolitan Houston. We are the second largest 911 system 

in the country. I also am a recent past-president of NENA, the National Emergency Number Association, and also representing my 

friends in the Texas 911 Alliance. 

I brought with me, today, Mr. Chairman, Mr. Peter John and his 

daughter, Joyce, who were the subjects of a matter that has gained 

quite a bit of notoriety around the country, which was the home 

invasion that occurred in the southwest part of my jurisdiction in 

February. Mr. John and his wife were at home that afternoon 

downstairs. The daughter was upstairs. 

Mr. UPTON. Could you just point out who they are? 

Mr. MELCHER. Yes, right behind me. 

Mr. UPTON. Thank you. 

Mr. MELCHER. We are glad that they were able to take time to 

be here and—with us, and we are actually glad that Mr. John and 

Ms. John are actually here with us at all. February 2 some intruders invaded their home in an attempt to rob them, and actually 

shot Mrs. John while she screamed to her daughter, Joyce, who 

was upstairs. Joyce, who is 17 years old, grabbed the phone and 

did what everybody does when they are in need of emergency assistance. She dialed 911. She was greeted with a telephone recording that said, ‘‘Stop. You can not dial 911 from this phone.’’ And 

the details are in my written testimony. 

It is a tragedy not only because of the lack of access to 911, it 

is a tragedy that a 17-year-old has to go through such a horrific 

experience while her parents are being shot downstairs, but she 

thought it was the telephone instrument. She went to another instrument and tried it again. And only after the assailants fled was 

28

she able to leave the house and go to a neighbor’s house and dial 

911. We believe that the time span there was about 10 minutes. 

Now fortunately these people were not very good shooters and Mr. 

and Mrs. John have survived their injuries and are healing very 

nicely. And God has blessed them. But in the 10 minutes that we 

lost, had their injuries been more life threatening, the outcome 

could certainly have been different. But even more so, the assailants are still at large. That 10 minutes probably could have made 

the difference in capturing the assailants or not. And so I am 

pleased that they are able to be here with us today to put a face 

on the down side of what happens when we go too fast. 

You know, this is—I have appeared before your committee and 

others up here on the Hill several times, and I liken a lot of witnesses who testify before committees in two categories, begging or 

whining. We have never been in a position to do that, Mr. Chairman, and we are grateful to be able to come back to say that we 

are offering some hope, there is some light at the end of the tunnel, 

and we actually have some solutions for you. 

In my written testimony, I took the role of raconteur and divided 

some of this into the good, the bad, and the ugly. 

The good is that all of this technology that you have heard about 

today, and I won’t go into it again, is great. It offers consumers 

more choices, more options, and gives assets to people who need 

them who couldn’t get them before. The cost is bringing it down. 

So we have more people, more eyes and ears that have access to 

telephony and to communications devices. And those eyes and ears 

are reporting fires and crimes and emergencies and medical situations, so that emergency responders have better access to people 

who need help. But if we can’t get them into 911, it is hard to help 

them. And if we can’t find them, we can’t help them. 

So that is what we are here about today. 

The bad is that as we look at all of these new technologies that 

are coming to bear, they are trying to plug into an antiquated and 

fragmented 911 system. And unfortunately, our system in this 

country today is Jurassic in nature. It is woefully lacking in the 

ability to adapt to new and emerging technologies. That is the bad 

part. 

The ugly fact is that the system is so fragmented I don’t know 

that we will ever be able to achieve where we are going as technologies continue to emerge unless we address some standardization and some upgrade to our 911 infrastructure. But as the ugly 

is so bad, it can also be good, because the very technology that 

poses challenges to us in the 911 industry, should we be allowed 

to embrace it ourselves, it may actually be a solution in our future, 

both near-term and long-term, and I want to talk more about the 

light at the end of the tunnel. 

My fellow witnesses here today represent quite a good cross section. You have heard from ISPs in recent hearings as well as this 

one. You are hearing from incumbent local exchange carriers. They 

both have good arguments. They both have bad arguments. And 

they both talk out of both sides of their mouth, depending on who 

they are talking to. Some of them will go to the consumer and say, 

‘‘Let us be your new phone company,’’ but they will come to you 

and say, ‘‘We are not a phone company. You can’t regulate us.’’ But 

29

I think the majority of them are trying and doing a yeoman’s job. 

Some are doing an excellent job, and we will tell you about some 

successes in Houston. Others are not doing such a good job and are 

somewhat disingenuous in the way that they approach this, and we 

hope that the committee will address that. 

As I see it, your job before you, as you looking at rewriting the 

Telecommunications Act, is to make sure that 911 is a good, key 

component. And we applaud that effort, because 911, as a forethought, not an afterthought, is going to help us in the future. As 

you know, when we went to wireless technology, and regarding 

that, we have been in front of you before, 911 was kind of an afterthought, and we spent a lot of time playing catch up. 

But today we have a momentum that is built. And thanks to the 

effort of this committee and to Chairman Barton and all of those 

who really did it, we now have in place the Enhanced 911 Act. It 

has recently been signed into law. We obviously need to put a little 

more effort into that so that we get some good funding, which addresses the infrastructure that is so woefully inadequate that I described earlier, but it also lends some standardization capability 

and some national leadership capability in that joint program office. So getting that office up and running is very important and 

should be of the highest priority of your committee and this Congress. Getting some funding as far as grants are concerned to these 

E-911 systems up and doing what they are supposed to be doing 

is also a very, very high priority. 

I bring you success stories from Houston. We have in place technologies that address the capability of interconnecting today under 

the old regular, or what the techies are calling I2 or Incumbent 

type situations. We have a method that we built for the automatic 

crash notification where we had police car crash data and voice 

that were able to get into our system and that is done. 

Mr. UPTON. I might just ask you to summarize as you have——

Mr. MELCHER. Yes, sir. 

Mr. UPTON. [continuing] exceeded your—I don’t know if the clock 

down there is——

Mr. MELCHER. I didn’t know if the timer was set for us or not, 

but I will summarize. 

The issue is not a technological issue. It is a participation and 

a policy issue. We would encourage you to encourage the FCC to 

do some interim rulemaking while you guys wrestle with the Telecommunications Act. And we certainly appreciate your attention to 

this matter, because again, 911 as a forethought is going to help 

all of us. 

Thank you, Mr. Chairman. 

[The prepared statement of John Melcher follows:]

PREPARED STATEMENT OF JOHN MELCHER, EXECUTIVE DIRECTOR, GREATER HARRIS

COUNTY 9-1-1 EMERGENCY NETWORK

Mr. Chairman and members of the Committee, thank you very much for providing 

me with this opportunity to appear before you today. My name is John Melcher, and 

I serve as the Executive Director of the Greater Harris County 9-1-1 Emergency 

Network where we administer the 9-1-1 system serving approximately 4 million people in the Houston, Texas metropolitan area. 

30

THE VOIP 9-1-1 INCIDENT

Before we get started I would like to introduce a Houston family, the John family, 

to the committee members. Sitting behind me is Pastor Peter John, his wife 

Sosamma, and their daughter, Joyce. This family is quite fortunate to be here today, 

Mr. Chairman, as just a month ago both Pastor and Mrs. John were shot during 

a home invasion in their southwest Houston home. 

A quiet Thursday afternoon at the John residence in the Mission Bend subdivision 

was horrifically interrupted when the family confronted home invaders attempting 

to rob the family at gunpoint. Pastor John and his wife were shot during the commission of the felony. As he bled from his leg wound, the father exhorted his daughter to call 9-1-1 to summon an ambulance for him and his injured wife. The daughter ran and grabbed the cordless phone, dialed 9-1-1, and received this recording: 

‘‘Stop, you must dial 9-1-1 from another telephone. 9-1-1 is not available from this 

telephone line. No emergency personnel will be dispatched.’’

Joyce, thinking the problem was with the cordless phone, tried another telephone 

instrument in the house and got the same recording. After the assailants fled, frantic and desperate, she ran to a neighbor and dialed 9-1-1. Fortunately, her neighbor’s service had access to traditional 9-1-1 features and Public Safety Answering 

Point call takers who immediately arranged an ambulance dispatch for Joyce’s 

wounded parents. Needless to say this was an extremely traumatic incident that 

was exacerbated by a lack of access to emergency 9-1-1 services. 

This family’s experience typifies the American consumer’s relationship with new 

and innovative IP-enabled services and the dramatic impact these services have on 

public safety. Call it what you may, grace of God, good fortune, or Karma, the John 

family experience with Voice Over Internet Protocol (VoIP) broadband telephone 

service is a compelling yet harrowing story about the benefits of IP-enabled services 

while highlighting the need to formulate a forward plan for the future of emergency 

services in this country. 

I am a bit of a raconteur. I call the anecdote I relate to you today ‘‘IP-Enabled 

Services-VoIP. The Good, the Bad, and the Ugly.’’ This story brings home the benefits of VoIP that draw consumers and will continue to do so, exponentially. That is 

the good. The story I relate today to this committee will also describe the increasing 

strain on an already stretched and aging 9-1-1 infrastructure. This I will call the 

bad. Finally, I lay out as fodder for future discussion the support you can give public 

safety for us to realize the benefits of IP-enabled services and enable PSAPs across 

the nation to deliver a more effective and efficient response for emergency calls that 

are delivered to PSAPs with enhanced information to the call taker. While this part 

of my story could be called the ugly, in reality it brings the storytelling full circle. 

This is because when 9-1-1 can fully realize the benefits of IP-enabled services that 

ordinary consumers are seeing today, then the ugly becomes the good for both Public Safety and the citizens of the United States. 

THE GOOD

IP-enabled services VoIP services are dramatically changing the types of communications services offered to American consumers. The pace of technological innovation in the IP-enabled arena is unparalleled to any other time in modern communication industry. I have been involved in communications for over twenty-five 

years. Over 15 years have been in my role of a 9-1-1 system administrator. I would 

say that the revolution of IP-enabled services has a much greater impact on consumers than the divestiture of Bell System or the Telecommunications Act of 1996. 

Granted, both of the aforementioned watersheds in the annals of telecommunications history have helped usher in the IP revolution but the convergence of both 

voice and data in a unified architecture and protocol has a more direct impact on 

consumers. 

These new VoIP services are lower in cost, offer more flexible features, and offer 

unlimited calling plans. These services are touted as superior substitutes to the regular circuit switched Plain Old Telephone Service lines (POTS) they are supplanting. The VoIP services are lower in cost for a myriad of reasons. First, VoIP 

services offered today do not carry the fee structure associated with regulated telecommunications services. Second, VoIP is unique in that the IP application, in this 

case VoIP, can be physically separated from the transmission medium, i.e. the copper twisted pair, fiber, or coaxial cable, that carries the IP packets to the consumer. 

Unlike traditional telephony, the IP-enabled service provider can choose to vend 

their services with or without the underlying transmission facility. This definitely 

can impact the price points associated with communications services. Lastly, some 

VoIP applications, both at the residential and enterprise levels, require fewer perVerDate 0ct 09 2002 14:37 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6621 F:\DOCS\20745.TXT HCOM1 PsN: JOEP
31

sonnel to install and maintain and thereby can lead to reduced monthly recurring 

charges. 

VoIP is also innovative in the flexibility it affords consumers. Traditional telephony necessitates that consumers contact their service provider to request the service 

provider activate features such as call forwarding, answering options, and personalized rings. New VoIP applications allow consumers to ‘‘design’’ their service. Follow 

me roaming, call screening, and personalized ringing can all be programmed by consumers via Internet access to their account. As more features of communications are 

pushed out to the end of the network and come under the direct control of the end 

user the services provided are more flexible and dynamic. While this empowers consumers in the communications market it also has an unintended consequence of 

making access to 9-1-1 services problematic. I shall discuss this in more detail shortly. 

VoIP is the harbinger for the ultimate product for consumers in communications 

services: geographic number portability. VoIP combines low cost with flexibility by 

allowing a New York based talent firm to have Los Angeles area code numbers 

(flexibility) without the exorbitant costs associated with foreign exchange mileage 

and usage charges. The benefits for parents with children attending far away universities, elderly parents on limited incomes, and other similar consumer scenarios 

are easily envisioned. 

The Johns opted for their Internet based VoIP because of the unlimited calling 

plan. VoIP services are generally marketed as a comparable substitute for traditional circuit switched local and long distance services. For families and small businesses that use long distance to keep in touch with family members or business contacts, this new technology is a very attractive enticement to supplant existing POTS 

services. 

The future of IP-enabled services is even brighter as 3rd Generation(3G) wireless 

networks are deployed. Wireless broadband coupled with IP technology is poised to 

launch a new generation of IP devices that will allow mobile consumers a wider 

array of communication and information services. The future of communication—

voice, data, text, video, etc.—is exciting and it is just around the corner. 

Divestiture, competition, and deregulation of telecommunications have provided 

the required impetus of investment to bring a host of new and exciting communications services to consumers. This bodes well for the future public safety and emergency dispatch services. As the recently liberated Martha would say, ‘‘That is a good 

thing.’’

THE BAD

It is no secret today’s 9-1-1 infrastructure is rooted in an era where communications service consisted of fixed-location, POTS lines installed by a monopoly telecommunications provider. This monopoly provider was expected to provide cheap 

and reliable 9-1-1 systems as a ‘‘social obligation’’ associated with being given monopoly rights. It was a symbiotic relationship for both the telephone company and 

the local 9-1-1 administrators. The telephone company benefited because their subscribers had easy access to emergency services. The 9-1-1 administrators could offer 

reliable emergency services while assessing small 9-1-1 service fees on subscriber 

phone bills. 

The communications landscape has changed dramatically since Texas’ first enhanced 9-1-1 system was activated in Houston, Texas in January of 1986. Approximately 40% of our total 9-1-1 call volume is from wireless phones. The telecommunications providers in our area have mushroomed from 6 franchise telephone companies to over 200 competitive local exchange providers offering telecommunications 

as either pure resellers, facilities-based carriers using Unbundled Network Element 

(UNE) platforms, 3rd party facilities, their own facilities, or a combination of any 

of the aforementioned. 

Our 9-1-1 system has changed little during this same period. We have pioneered 

competition in the 9-1-1 database management arena so as to have a neutral 3rd 

party assess the accuracy and timeliness of the Local Exchange Carrier (LEC) data 

being submitted into the 9-1-1 system. Our 9-1-1 network components are still provided to us by the incumbent LEC, SBC, in an uneasy but working relationship with 

Intrado, our designated 9-1-1 database management services provider. I say uneasy 

because the splitting of 9-1-1 network management from 9-1-1 database management, two processes that are functionally ‘‘joined at the hip,’’ is unheard of outside 

of Texas. The ILEC providing 9-1-1 services generally provides both of these key 9-

1-1 service components. 

Given the consumer controlled aspect of new IP-enabled VoIP services, especially 

those VoIP services that are Internet based, today’s 9-1-1 infrastructure, while long 

32

on reliability, comes up short on its ability to accommodate these new technologies. 

Members of this committee, along with the FCC, have had a glimpse of what I am 

implying. Representative Shimkus, a strong and ardent supporter of E9-1-1 services, 

was instrumental in passing the recent ENHANCE 9-1-1 Act in the waning days 

of the last Congressional session. This legislation, when funded, will help facilitate 

the deployment of wireless 9-1-1 and in general improve the 9-1-1 infrastructure. 

The lesson we learned with wireless was that the 9-1-1 system is extremely limited in its ability to handle mobile communication technologies. Consequently, the 

call routing logic was pushed back into the wireless carrier network. Wireless carriers use either a Mobile Positioning Center (MPC) or translation tables in the 

switch memory of the Mobile Switching Center (MSC) to maintain routing tables 

that associate cell tower with a PSAP for the routing of wireless calls. These tables 

are used to assign a pseudo Automatic Number Identification (p-ANI) that will correspond to a static record in the ILEC 9-1-1 system. 

Some types of VoIP, especially applications relying on the Internet and existing 

broadband connections, share much in common with wireless 9-1-1. There is one distinct and major difference, however. Unlike wireless Phase II where the wireless 

service provider is responsible for accurately assessing the location of the user within FCC defined requirements for location services, the Internet based VoIP services 

location is determined entirely by the end user. This precludes automatic submission 

of user location data to the 9-1-1 system. 

This is problematic for both consumers and public safety. Consumers have a reasonable and realistic expectation that access to 9-1-1 services is available on any 

communications service that is being touted as a replacement for POTS services. 

Public safety educators have done a yeoman’s job in educating the American public 

about the benefits of 9-1-1 service. Ask any child over the age of 4 who should they 

call if Mommy can’t wake up and the majority of them will tell you 9-1-1. Hardly 

a week goes by without some televised action show that has a dramatic scene where 

someone yells, ‘‘Call 9-1-1.’’ Furthermore, the public expects that access to 9-1-1 

services is not only ubiquitous it is also automatic. That is, the consumer need do 

nothing more than request communications services. Providing location of service 

usage is an alien and foreign concept to many consumers. 

PSAPs personnel, while trained to handle emergency calls irrespective of how 

they come into the PSAP with or without the attendant data, have come to rely on 

the public’s knowledge of 9-1-1 to pattern operational practices to optimize their response to emergency incidents. VoIP’s inability to access the 9-1-1 system elements 

and the delivery of emergency calls to local telephone lines compels PSAP personnel 

to reassess existing PSAP call-handling procedures, in ways currently unknown both 

to the PSAP and to the VoIP provider. PSAP personnel need to know a relatively 

uniform call processing function for VoIP calls so as to properly train call takers. 

VoIP providers need to appreciate the call taking and dispatch function in PSAPs 

so as to provide the optimal information required by PSAPs for emergency calls 

placed by VoIP subscribers. This process takes time. In our business time equals 

money and may also equal lives. 

This change of roles for the consumer as well as the PSAP personnel require 9-

1-1 system administrators take on an extensive educational campaign to educate 

both the public and our PSAPs about the shortcomings of VoIP interfacing with the 

9-1-1 system. This educational process may address immediate needs but may have 

the unintended consequence of diminishing the relevance of 9-1-1 in the public’s eye. 

We are leery of any campaign that says ‘‘9-1-1 is the number for emergencies except 

if you use VoIP.’’ Given the projected exponential growth of VoIP and other IP-enabled communications services coupled with the limited innovation in today’s 9-1-

1 services market, I can tell you this dilemma certainly represents the Bad in the 

IP-enabled Voice Market. 

THE UGLY

I pose this question to the members of the committee, ‘‘Do you believe that ubiquitous access to 9-1-1 emergency services, irrespective of communication technology 

platform, is the only acceptable goal for 9-1-1 public policy?’’ If your answer to that 

question is ‘‘Yes’’ then you must accept as axiomatic the fact the existing 9-1-1 infrastructure must be completely overhauled so as to accept new and innovative technology platforms supporting IP-enabled services. The ramification of such a public 

policy position is a double edge sword. Imagining the benefits of a new IP based 

9-1-1 system with enhanced data elements and bringing that reality to consumers 

is a goal that would fit quite nicely in any political platform. However, the reality 

of supporting two households, the existing log cabin and building the manor house, 

can be politically unpalatable during times of severe budget constraints. 

33

The idea of a new and improved 9-1-1 systems based on packet technologies have 

been touted by outgoing FCC Chairman Michael Powell. Commission Copps recently 

iterated some of the same benefits of an IP-based 9-1-1 system when he spoke to 

NENA last month in Washington D.C. The FCC and many VoIP Providers are visionary in seeing an enhanced 9-1-1 infrastructure that not only includes ANI and 

ALI but also patient specific information such as medical records or language preference. This is all quite doable with the convergence of voice and data using IP on 

a unified platform. 

I need to note that a major catalyst that brought about the first generation of 9-

1-1 services is no longer in existence. The absence of this catalyst can be directly 

attributable to the same factors that have ushered in this communication revolution: namely the divestiture of the Bell system and the Telecom Act of 1996. The 

first generation of 9-1-1 systems, basic, and the second generation represented by 

enhanced features were both brought about through AT&T. AT&T developed the 

basic 9-1-1 technology and upgraded the platform for the enhanced features of ANI, 

ALI, and Selective Routing. Many of the country’s enhanced 9-1-1 systems were installed after divestiture but nevertheless they have their roots in the old AT&T monopoly structure. 

There is no nationally prominent catalyst such as AT&T that can serve to design, 

test, and deploy a third generation 9-1-1 platform throughout the United States. It 

is also very important to understand the dual role of the ILEC in the roll out of 

the first and second generation of 9-1-1 platforms. These platforms were rolled out 

prior to the Telecom Act of 1996 and the introduction of competition to the local exchange market. Then, it really didn’t matter that the 9-1-1 service provider was also 

the only phone company in town. Now it does matter greatly. Remember that local 

regulators expected the ILEC to offer 9-1-1 at substantially reduced rates as return 

favor for enjoying monopoly presence in the local exchange market place. Therefore, 

9-1-1 was never and is still not a profit center for the existing 9-1-1 service providers who for the most part are still the ILECs. 

The competitive local exchange market also offers no incentive for the ILEC to 

upgrade the 9-1-1 infrastructure. Upgrades will only facilitate the interconnection 

of competing service providers. Currently the traditional interconnection to 9-1-1 

system elements is under public utility commission approved interconnection agreements between certified local exchange carriers and incumbent local exchange carriers. Denying access of these 9-1-1 system elements to non-certified IP enabled providers serves only to create a natural barrier to competition for the ILEC. Simply 

put, why should the ILEC voluntarily allow competitors access to 9-1-1 systems and 

thereby further erode their existing customer base? 

Lack of access to 9-1-1 system elements compels VoIP providers to seek other 

methods to deliver calls to PSAPs. These other methods likely do not get answered 

with the same priority or have the same information that is generally associated 

with traditional 9-1-1 call delivery. This has the effect of creating a caste system 

for emergency services. 

Straddling the gap between generations can be a delicate balancing act for PSAPs, 

IP-enabled service providers, regulators, and legislators. There are costs associated 

with the support of two platforms for the duration of migration. These costs will be 

borne by all stakeholders. The existing 9-1-1 system is rooted in a geographically 

localized, dedicated trunk, and circuit switch platform paradigm. The cost to replicate this model nationwide for many IP-enabled service providers is just not economically sustainable. Many of these entrepreneurial IP-enabled providers have 

very narrow profit margins. It is probably wiser to focus these limited assets on 

building a new generation 9-1-1 platform and attempt to keep the costs associated 

with current generation interconnection at a minimum. This requires a realistic assessment of performance expectations of VoIP providers in the current architecture 

while avoiding ‘‘functional fixedness’’ when looking at ways to interconnect to today’s 9-1-1 system elements. Functional fixedness is a term used in the practice of 

psychology which can best be described as follows: 

People are often very limited in the ways they think about objects, concepts, and 

people. When something is thought of only in terms of its functionality, then the person is demonstrating functional fixedness. This type of thinking is narrow and limited, often inhibiting the problem solving process. 

NEXT STEPS

The immediate need of 9-1-1 system administrators is to rip away the veils. Some 

VoIP providers wear the veil of ‘‘lack of 9-1-1 system element access’’ to cover their 

reluctance to spend money on 9-1-1 interconnection. Compelling the ILECs to open 

up access to 9-1-1 system elements irrespective of certification status will certainly 

34

go a long way in removing this veil. Also, ILECs need to be compelled to allow new 

and innovative ways of allowing interconnection while not compromising system integrity. Some alternative examples of access would be implementing operational procedures to allow existing CLECs to serve as aggregators of emergency services instead of requiring each service provider to establish their own interconnection. This 

aggregation service is currently being offered by firms like Level 3 Communications 

but may require altering existing interconnection agreements. 

Another solution is leveraging the Public Switched Telephone Network (PSTN) 

with proven technology. Greater Harris County 9-1-1 is using the PSTN to deliver 

emergency calls from telematics call centers to PSAPs via the existing 9-1-1 network, replete with ANI and ALI. I believe this same technology is being used for 

deliver of VoIP calls in Washington State and Rhode Island. 

ILECs can also offer an aggregation service of their own by strategically placing 

IP gateways with existing 9-1-1 routers. All of these examples serve as viable alternatives to costly direct trunking. Local regulatory bodies could execute a national 

policy similar to local state public regulatory commissions executing the federal 

Telecommunications Act of 1996. This would make these alternatives available to 

new IP-enabled technologies needing to deliver 9-1-1 calls to PSAPs. Ripping away 

this veil of lack of access will squarely put the onus of making 9-1-1 services available a service provider decision. 

Local regulatory bodies executing a national 9-1-1 policy can also assist 9-1-1 administrators in ripping away the ‘‘quality of service and network integrity veil’’ (ie, 

subterfuge or smoke screen) worn by the ILECs. As I mentioned earlier in my testimony there is currently nothing that would entice or compel the ILECs to open up 

access to 9-1-1 system elements that would facilitate the interconnection of competitors. Many ILECs do not allow non-certified IP-enabled service providers traditional 

access to 9-1-1 system elements because they fear for the integrity of the 9-1-1 network. It appears Bell South does not want to entertain alternative interconnection 

methods such as the PSTN solution being used in Greater Harris County 9-1-1 for 

telematics merely because it isn’t the traditional method of doing 9-1-1. Certification 

as a CLEC is no guarantee of sterling network integrity. The record books are full 

of examples of failed services by certificated local exchange carriers. Greater Harris 

County 9-1-1 had an incident where an end office was isolated from the 9-1-1 system 

because redundant circuits terminated in the same failed channel bank located in 

the LEC end office. Conversely, lack of certification does not automatically mean 

substandard network interconnection. In a competitive market place quality of service is a key product differentiator whether that service is provided by a certified 

CLEC or a non-certified IP-enabled service provider. 

And functional fixedness should not drive the spending of resources to interconnect to the existing 9-1-1 system. If there is a proven and tested method that 

is cheaper than the traditional direct trunk architecture, then the ILECs providing 

9-1-1 elements should be open to alternative interconnection methods. The veil of 

‘‘network integrity’’ must be stripped away to obliterate the caste system that is 

being formed today. 

The support for the third generation of IP-based 9-1-1 systems is more complex. 

Many stakeholders are simultaneously driving toward that destination via a variety 

of industry fora. The National Emergency Number Association, the Emergency Services Interconncetion Forum, the Internet Engineering Task Force , and Network Reliability and Interoperability Council are four key players all currently looking at 

next generation 9-1-1 platforms. In summary I see the following as key ingredients 

for successful design and deployment of a 3rd generation nationwide 9-1-1 IP based 

platform:

• Regulation and legislation conducive to industry development and testing of a new 

IP-based platform 

• Realization by regulators and legislators that 9-1-1 is a ‘‘second best’’ market (as 

described by economists Richard Lipsey and Kelvin Lancaster in 1956) rife with 

social obligations and requiring oversight instead of laissez-faire competition 

market management 

• National catalyst to serve in the capacity AT&T did for 1st and 2nd generation 

platforms-perhaps the newly authorized joint program office? 

• A business model that will assure industry participants of a reasonable rate of 

return on investment in a 3rd generation network 

• Realization that there needs to be a viable business case in support of 9-1-1

FINAL THOUGHTS

I have covered a lot of ground in a short period. So in closing please allow me 

to offer you what I see as the current state of affairs. I speak from over 25 years 

35

in public safety and 9-1-1 administration. We are truly at a crossroads for 9-1-1. IPenabled services, in particular VoIP, present us with both an unprecedented challenge to 9-1-1 as well as an unprecedented opportunity for the advancement of 

emergency services. To put it a bit more philosophically, VoIP is the yin and yang 

of 9-1-1. 

We can continue down the bumpy and twisted road we traveled with wireless 9-

1-1 or we can learn from our past experiences. This means we accept the fact that 

the problem is not with new technology but with the existing 9-1-1 infrastructure. 

We can quickly alter our learned behaviors and paradigms to accommodate these 

new VoIP services to our existing infrastructure and rip out the roots a burgeoning 

caste system of access to 9-1-1. I enlist your support in helping both VoIP providers 

and 9-1-1 service providers understand this concept. 9-1-1 system administrators 

will work to educate our citizens about the 9-1-1 services available to them via their 

communications providers. 

But this stop gap solution is short term. Unless we wish to face a similar dilemma 

with the next new mobile technology just beyond the horizon we must work to develop and deploy a new nationwide 9-1-1 infrastructure capable of interfacing to numerous communication platforms. This migration must occur within in the next 60 

months or this country puts at risk the social objective of 9-1-1 anywhere, any time, 

for any device. This committee has the resources and influence to help us attain this 

ambitious goal and we in the Public Safety industry encourage your active support. 

I thank you again for lending me your ears and giving me your time to discuss 

a matter I feel so passionately about. Your attention is most gratefully appreciated. 

Good day.

Mr. UPTON. Thank you. Again, thank you. 

Ms. Puckett. 

STATEMENT OF KAREN PUCKETT 

Ms. PUCKETT. Mr. Chairman and members of the committee, my 

name is Karen Puckett. I am the President and Chief Operating 

Officer of CenturyTel. We provide telecommunications to 22 States, 

16 of the 22 States are represented in the Commerce Committee. 

You know, we are pretty excited about the future of new application technologies, such as VoIP, and we are adapting and evolving 

our business model. In the written testimony that I provided, you 

will see a map of a large fiber IP transport network that runs 

through middle America that we own and operate, and we are 

using this network transport for voice and data traffic for wireless, 

wireline, long distance, and IP providers today. 

But the concern is there is a level of misunderstanding related 

to IP technology. In fact, there is a confusion around the new application technology and the network technology that enables these 

applications to be delivered. So I brought with me a diagram over 

here to my left that illustrates the relationships and the dependency of the core network to the underlying enabler of these emerging applications. 

You know, Internet Protocol is blowing the voice and data market wide open, allowing everyone from large cable companies to 

Internet startups, like Pulver.com and Vonage to sell applications 

to businesses or residential consumers. This is assuming that companies like CenturyTel or the local cable company provide the network investment that enables these VoIP applications. 

Building and expanding our country’s telecommunications infrastructure should be a priority to all telecommunication providers, 

and I am especially proud of CenturyTel’s leadership in bringing 

telecommunications and economic development to rural America. 

We average only 14 access lines per square mile, but despite this 

low density, we have enabled over 70 percent of our customers with 

36

broadband services, and we are focused on providing and expanding broadband capability as we deliver voice data and applications, 

which really leads me to the key point. 

Advanced communication networks like ours are the foundation 

for realizing the promise of IP-enabled services in all markets. The 

network is the engine that makes IP services possible. 

IP technology has also changed the marketplace. The new reality 

is intense competition that is forcing a fundamental shift in our industry. This includes proposed mergers, the new services, more 

choices, and much more price points and lower price points. The industry is and has adapted to the changing marketplace. Now the 

Nation’s communication policy must adapt as well. 

With all of this new opportunity, however, there are some issues 

that are emerging that are very concerning. Payment avoidance for 

use of the network is a growing problem. You know, if you walk 

out of a restaurant after you enjoy a meal without paying, it is 

theft. If too many people walk out without paying, the restaurant 

will shut down, and the community’s economy will suffer. The same 

is true for rural telecommunications. Phantom traffic and other 

payment avoidance schemes are the same thing. We need Congress 

to be clear that this is no free lunch. 

Let us talk a moment about consumers. 

Some in this city will tell you now that we have things like Internet phone service we can forget about USF. They don’t understand 

that IP services still run on the core underlying network, networks 

that reach into every community. Without the underlying networks, there is no Internet, there is no e-mail, there is no dial tone, 

there is no real-time communication to the rest of the world. 

So specifically, we need Congress to support stability and universal service by broadening the base of support and set higher 

standards for all of the recipients of USF. And from a business perspective, it is really clear the walls have come down between cable, 

wireline, wireless, satellite, and Internet based companies, yet 

these companies are treated in distinct different ways from a regulatory perspective. We have some with little to no regulatory oversight while others, like ourselves, are heavily regulated. Like services should be regulated the same way, and all should be held to 

the same service standards. 

Mr. Chairman, thank you for holding this hearing. Voice-over IP 

is just one example of a really fascinating future. We believe there 

are even better things to come. I understand that this subcommittee will soon be exploring IP video. Just as the voice marketplace is being transformed by VoIP, local phone companies are 

eager to enter the competitive digital television market. 

I appreciate the opportunity. 

[The prepared statement of Karen Puckett follows:]

PREPARED STATEMENT OF KAREN PUCKETT, PRESIDENT AND CHIEF OPERATING

OFFICER OF CENTURYTEL, INC. 

Mr. Chairman, members of the subcommittee, my name is Karen Puckett, and I 

am President Chief Operating Officer for CenturyTel. I appreciate the opportunity 

to appear before you today thank you for this opportunity to appear before you to 

address the critical subject of updating the nation’s telecom laws and regulations 

to keep pace with the dramatic changes we see all around us today in the new communications marketplace. I will briefly highlight these technology advances; describe CenturyTel’s aggressive approach to technology deployment and key role in 

37

making new service available; describe the challenge technology also presents to 

public policy; and suggest specific areas where national action is important and 

where your leadership is critical. 

I. VOIP IS AN APPLICATION THAT DEPENDS ON A BROADBAND CONNECTION ENABLED BY

AN UNDERLYING NETWORK

Action must be based on solid understanding of the technology and the market. 

The level of misunderstanding related to IP technology is a concern to those of us 

who work with cutting edge technology every day, and even more so to those who 

invest billions in our networks. In particular, there is confusion between new application technology such as VoIP that is deployed on top of networks, and the network 

technology that enables these applications, such as high capacity transport, fiber 

loops, DSL, or sophisticated switches and network management systems. 

VoIP is an example of even better things to come, as our industry increasingly 

integrates with the computer hardware, software, and entertainment sectors. Internet Protocol is blowing the voice market wide open, allowing everyone from major 

cable companies to Internet upstarts like Pulver and Vonage to serve a business or 

residential customer. Assuming, that is, that a provider such as CenturyTel or the 

local cable company has made the network investment required to enable a 

broadband connection. 

II. CENTURYTEL AND COMPANIES LIKE IT ARE BUILDING RURAL AMERICA’S BROADBAND

NETWORK

I am especially proud of Century Tel’s leadership in bringing technology and economic development to rural America. We serve 2.3 million customers in 22 states. 

We are the eighth largest local phone company in the United States. Seventy-five 

percent of our customers are residential. We only average 14 access lines per square 

mile. Nonetheless, over seventy percent of our customers have access to CenturyTel 

DSL. 

CenturyTel is adapting and evolving our business model to meet the evolving 

needs of our customers. Our 7,000 employees are very focused on further expanding 

our broadband capability as well as delivering the video and data applications of the 

future. 

This leads me to our key point: Advanced communications networks like ours are 

the foundation for realizing the promise of IP-enabled services. Without investments 

by companies like CenturyTel, Citizens, Consolidated, FairPoint, Iowa Tel, Valor, 

and many others, there would be no VoIP. There would be no broadband connection. 

There would be no switched digital video. There would be no platform over which 

to deliver the new services that have yet to emerge. 

III. IP TECHNOLOGY IS ONE OF THE CATALYSTS OF THE CHANGING MARKETPLACE. 

POLICY MUST RACE TO KEEP UP. 

Without question, the further integration of IP-enabled services as a telecommunications alternative offers both challenges and opportunities for local telecommunications companies to adapt to a new world of rapid-paced innovation and intense 

competition from a wide variety of players. Equally true, this new reality is forcing 

fundamental shifts in our industry—from proposed mergers to the new services and 

choices our companies are rolling out. We recognize this at CenturyTel. For example, we are now leveraging our broadband network to trial and aggressively pursue 

an IPTV product offering. Finally, nine years after the Telecommunications Act’s 

passage, we are seeing the real competition—facilities-based competition—that will 

be positive for consumers and for the U.S. economy. We are adapting with the marketplace, with technology, and with evolving consumer demands. Now, the nation’s 

communications policy must adapt as well. 

Consumers and our economy urgently need a modern telecom policy that reflects 

today’s realities and charts a constructive role for U.S. policy: safeguarding ongoing 

priorities such as universal service and law enforcement needs; and, encouraging all 

companies in today’s marketplace to continue making the investment necessary to 

develop and deploy innovative new choices, beyond just VoIP. 

Since we have barely scratched the surface of broadband’s potential to produce a 

whole new generation of innovative applications, I appreciate knowing that this 

Committee has proposed to write policies that broadly encourage network investment and product innovation far beyond first-generation VOIP. 

38

IV. KEY POLICY DECISIONS FACE CONGRESS AND REGULATORS

A. Affirm that those using the network must pay for their use. 

There is no free lunch, and there is no free network. 

Payment avoidance is a growing problem. If you walk out of the grocery store 

without paying, it’s theft. If too many people walk out without paying, the grocery 

store will shut down, and the community will wither. The same is true of rural telecommunications. ‘‘Phantom traffic’’ and other payment avoidance schemes are the 

same thing. 

What can Congress do?

• Use its oversight authority to make clear that services used, including the network, must be paid for, and that theft of telecommunications services is theft 

plain and simple. 

Intercarrier compensation refers to the system of payments that support the network all carriers—ILECs, IXCs, IP carriers—use to originate and/or terminate their 

traffic. Without that network, no one would be in business. By far the most dangerous change proposed is ‘‘bill and keep,’’ in which no payments are actually made. 

This would not be a constructive change. It would end, not mend the system, give 

a free ride to some companies, and ignore basic laws of economics. 

What can Congress do?

• Clarify that companies should pay the cost of using one another’s networks, and 

direct the FCC to render a decision consistent with this principle, and do so 

within six months. 

We currently are awaiting the FCC’s decision concerning Level 3’s petition to be 

exempted from certain intercarrier payments. This will determine if VoIP providers 

whose calls depend on local communications networks must pay for their use of 

these networks—as their competitors are required to do. 

That is a question with far-reaching implications. I thank the members of this 

Committee who have spoken out on this important proceeding and made clear the 

importance of maintaining strong, viable networks across the nation—and requiring 

all who use these networks to help pay for their upkeep and continued evolution. 

B. Address social and public safety concerns. 

Members of Congress have made it crystal clear that ubiquitous 911 and E911 

is a critical national priority. Recent news articles demonstrate that customers either take it for granted that they have E911, or assume that they’ll never need it. 

When they discover it’s not available, or find out they really do need it, it’s too late. 

The results have been tragic. Finger pointing does not solve the problem. Congress 

can simply make clear that public safety responsibilities apply to all, and must be 

fulfilled. 

C. Support the 21st century network through maintaining the Nation’s commitment 

to Universal Service. 

Some will tell you, ‘‘Now that we have things like Internet phone service we can 

forget about universal service.’’ They either ignore or don’t understand that IP services still run on networks, networks that reach into every community. Without these 

networks, there is no Internet, no email, no dial tone, and no real-time, two-way 

connection to the broader world. Fortunately for America, you ‘‘get it.’’ 

Universal service helps make sure these networks are viable in rural areas, and 

are continuously upgraded. It does so by helping ensure affordable access to a dial 

tone, and Internet access in our schools, libraries and rural health-care facilities. 

These remain important public policy goals. If anything, universal service is more 

important today than at any point in our nation’s history, as we transition from an 

industrial to an information economy. Technology-neutral universal service would 

require every competitor to contribute their fair share to support this promise to 

rural America. 

I firmly believe that universal service remains a critical priority for the nation, 

especially for the people served by companies like CenturyTel that are committed 

to rural America. We can all be excited about advances such as IP, but we as a nation must not forget those people who need help just to have basic access to the security of a dial tone. 

What can Congress do?

• Support stability in universal service by broadening the base of support and setting high standards in order to receive universal service. 

• Consider explicitly supporting broadband deployment. 

39

D. Reform retail Regulation 

Silo-driven policy making clouds the view of what is best for the customer. While 

much retail regulation occurs at the state level, Congress is responsible for the 

framework in which both FCC and state regulation occurs. For example, Congress 

preempted state regulation of wireless rates, and in 1997 preempted state and local 

barriers to entry. 

The walls have come down between cable, landline, wireless, satellite and Internet-based companies. Yet these companies are treated in distinctly different ways 

based not on the services they provide, but the technology they use. This is not a 

recipe for renewing America’s information leadership, nor is it a recipe for speeding 

advanced services into our communities. 

How can my rates be regulated when someone else can use my network to provide 

an inferior product unregulated? Similar services should be regulated similarly, and 

all should be held to a similar standard. 

The solution, of course, is not to impose today’s regulatory regime onto innovations. The thoughtful approach is to take up the bigger challenge which this Committee is undertaking: to explore the choices available in today’s marketplace, to understand just how fundamentally the world of communications has changed, and to 

update our nation’s telecom laws to keep pace with these changes. We must get government out of the business of determining which technologies and services are best, 

and hand that power and that choice to consumers. This is the united vision of the 

U.S. Telecom Association. Our trade association represents everyone from small, 

rural co-ops, to mid-size companies like CenturyTel, to some of the largest communications providers in the world. To continue growing, competing and investing, our 

company must be at parity with our competitors. 

What can Congress do?

• Move away from silo-based regulation where the treatment depends on how a 

company is categorized rather than the service it provides. • Support greater regulatory flexibility at both the federal and state levels to create 

and promptly offer products and services that respond to customer demands. 

E. Ensure Regulators Make Internet-time Decisions. 

I’ve described several key areas where decisions have simply taken too long: Clarifying universal service policy, reforming intercarrier compensation, ensuring that 

companies don’t evade their responsibility to pay for the networks they use. How 

VoIP traffic is classified is another area where delay has created uncertainty, as we 

saw in the FCC’s recent Madison River consent decree, where the parties did not 

know what their duties would be because the FCC had not clarified them. These 

and other important decisions in some cases have been pending for years. As you 

reform the substance of telecom law, I hope you will also address the process 

through which decisions are made. 

What can Congress do?

• Consider deadlines for agency decisions. 

• Require the agency to hear from witnesses, or to deliberate face-to-face in important proceedings. 

V. CONCLUSION—THIS COMMITTEE’S ACTIONS WILL HELP BUILD THE FRAMEWORK FOR

TOMORROW’S TELECOMMUNICATIONS NETWORKS AND SERVICES

Mr. Chairman, I thank you for holding this hearing. Without question, VoIP is 

worthy of our attention and enthusiasm. However, it also is important to bear in 

mind that VoIP is but one compelling example of what IP can contribute to the nation’s economy and consumers. I understand that this Subcommittee also soon will 

explore IPTV. Just as the voice marketplace is being transformed by VoIP, local 

phone companies are eager to enter the competitive fray in digital television, offering consumers an additional choice beyond cable and satellite—and a true market 

alternative to cable’s bundle of voice, video and data all on one bill. 

We too are excited about the future. We are excited about deploying new technologies and creating new services for our customers and communities. Because we 

work with them every day, we believe in the potential of IP and other communications innovations to advance our economy and our quality of life. We appreciate your 

hard work as you craft telecommunications law for a new century. Your decisions 

will shape the financial community’s views of what investments to support. We are 

eager to work with you! I thank you for the opportunity to join you today. I look 

forward to your questions.

Mr. UPTON. All right. Thank you. 

Mr. Rutledge. Welcome back. 

40

STATEMENT OF THOMAS M. RUTLEDGE 

Mr. RUTLEDGE. Thank you, Chairman Upton and members of the 

subcommittee. My name is Tom Rutledge, and I am the Chief Operating Officer of Cablevision Systems Corporation in New York. I 

also serve on the Executive Committee of the National Cable and 

Telecommunications Association. Thank you for the opportunity to 

appear before you today and to discuss the issues surrounding the 

deployment of Voice-over Internet Protocol, VoIP services. 

The regulatory policy framework embodied in the Telecommunications Act of 1996 has facilitated the significant investment in 

state-of-the-art networks necessary for the deployment of advanced 

services. Simultaneously, the development of technology to transmit voice calls using Internet protocols has enabled Cablevision 

and other cable operators to use these broadband networks to provide customers with exciting services, including Voice-over IP. With 

more than 1.3 million customers receiving VoIP services nationally, 

VoIP has emerged as a lower cost means to accelerate the longsought goal of facilities-based local competition. In addition, VoIP 

customers can customize their communications options in a myriad 

of ways not possible with traditional circuit-switched technology. 

The stable deregulatory framework will allow VoIP and circuitswitched voice providers to continue to deliver increased value and 

technology to consumers. Since 1998, Cablevision has invested $5 billion in a two-way 

broadband network that reaches 4.4 million homes in the New 

York metropolitan area. Since 1996, the cable industry as a whole 

invested almost $95 billion, roughly $1,300 per customer to upgrade more than 1 million miles of cable plant. 

This investment has allowed cable operators to offer a range of 

communication services over a fiber optic platform to approximately 95 percent of homes nationwide. Today, Cablevision offers 

analog and digital video, video on demand, 15 high-definition television services, interactive services, high-speed Internet access, and 

voice services to all of the 4.4 million homes passed by our network. 

Our VoIP service, ‘‘Optimum Voice,’’ is one of the most successful 

products, one of our most successful products. We launched Optimum Voice at the end of 2003, and today Cablevision serves 

350,000 customers, and we are adding over 1,000 customers per 

day. For a flat fee of $34.95, Optimum Voice includes unlimited 

local, regional, and long distance calling as well as advanced calling 

features, full E-911 service, and the ability to meet law enforcement’s authorized requests for surveillance. 

Optimum Voice also includes a suite of IP applications that allow 

customers to forward calls to three different locations simultaneously, to retrieve voice mail on e-mail, and to customize the way 

they want to receive voice communications by using an interactive 

web portal. We, like our cable colleagues, will continue to add features that will make our VoIP service an increasingly valuable 

communications tool for our customers. 

The introduction of new technologies, such as VoIP, presents an 

opportunity to reexamine the rules applicable to voice entrants and 

to develop a Federal policy framework for VoIP that supports its 

continued rapid deployment. The appropriate policy framework 

41

would continue the availability of the right to interconnect and exchange traffic with other providers, the right to obtain telephone 

numbers, and the right to access the facilities and resources necessary to provide VoIP customers with full and efficient 911 and E911 services. It is also critical to ensure a rational and equitable 

system of intercarrier compensation and to reform universal service 

in a manner that maintains its goals while benefiting from economic opportunities presented by new technologies. 

While advancing this approach, we recognize that VoIP providers 

have a responsibility to meet important social policy and security 

goals. Toward that end, the cable industry has worked closely with 

the FBI, the Justice Department, and other law enforcement agencies to meet those security goals. 

This Federal policy framework would enable VoIP providers to 

continue to innovate and compete freely while ensuring the fulfillment of important policy objectives. Most importantly, such an approach would continue to support the principle of a predictable, national framework for the development of these inherently interstate 

services. The legislation put forward by Representative Pickering 

last year offered a strong start toward achieving these goals, and 

we look forward to working with the committee this year. 

Although the primary focus of this hearing is Voice-over IP, there 

has been much talk lately about video-over IP technology. Unlike 

VoIP, IP video services remain largely in the conceptual stage with 

many economic and technical questions yet unanswered. While 

these issues are not right for legislative action, it would be appropriate for Congress to examine how the emergence of IP video may 

affect the whole media industry, including such matters as non-discriminatory deployment, public, educational, and governmental access, compensation to municipalities for the use of public rights-ofway, broadcaster and sports programming, localism, copyright, syndication, and the appropriate role of State and local governments. 

Any recommendations emerging from this review should be applicable to all multi-channel video-programming providers. 

In the meantime, all companies that propose to provide cable 

service, including telephone companies, must comply with existing 

Federal, State, and local laws, including securing cable franchises 

prior to constructing and not redlining neighborhoods. 

Today we are seeing a realignment of mass-market communications. This is an exciting new market for the cable industry and its 

customers. We look forward to continuing to work with the committee to develop a public policy for VoIP that fosters competition 

and consumer choice. 

Thank you again for this opportunity, and I welcome your questions. 

[The prepared statement of Thomas M. Rutledge follows:]

PREPARED STATEMENT OF THOMAS RUTLEDGE, CHIEF OPERATING OFFICER, CABLE- VISION SYSTEMS CORP. APPEARING ON BEHALF OF NATIONAL CABLE AND TELE- COMMUNICATIONS ASSOCIATION

Chairman Upton and Members of the Subcommittee, my name is Tom Rutledge, 

and I am the Chief Operating Officer of Cablevision Systems Corporation in New 

York. I also serve on the Executive Committee of the National Cable and Telecommunications Association. Thank you for the opportunity to appear before you 

today to discuss issues surrounding the deployment of voice over Internet protocol—

or ‘‘VoIP’’—services. 

42

OVERVIEW

The deregulatory policy framework embodied in the Telecommunications Act of 

1996 has facilitated the significant investment in state of the art networks necessary for the deployment of advanced services. Simultaneously, the development of 

technology to transmit voice calls using Internet protocols has enabled Cablevision 

and other cable operators to use these state-of-the art networks to provide customers with exciting and valuable communications services, including Voice-over-IP. 

With more than 1.3 million customers receiving VoIP services nationwide, VoIP has 

emerged as a lower cost means to accelerate the long-sought goal of facilities-based 

local voice competition. In addition, VoIP customers can customize their communications options in myriad ways not possible with traditional circuit-switched technology. 

A stable deregulatory framework that limits any regulation to those rules necessary for specific social and competitive purposes will allow VoIP and circuit 

switched voice providers to continue to deliver increased value and technology to 

consumers. 

CABLE INVESTMENT HAS LED TO NEW VOICE COMPETITION

Since 1998, Cablevision has invested $5 billion in a two-way broadband network 

that reaches 4.4 million homes in the New York metro area. Since 1996, the cable 

industry as a whole invested almost $95 billion—roughly $1,300 per customer—to 

upgrade cable systems by rebuilding more than one million miles of cable plant. 

This investment has allowed cable operators to offer a range of communications 

services over a fiber optic platform to approximately 95% of the homes nationwide. 

Today, Cablevision offers analog and digital video, video on demand, 15 high-definition television services, interactive services, high speed Internet access and voice 

services to all of the 4.4 million homes passed by our network. 

Our VoIP service, ‘‘Optimum Voice,’’ is among the most successful products we 

have ever offered. We launched Optimum Voice at the end of 2003, and today, a 

little over a year later, Cablevision has 350,000 customers, and we are growing at 

rate of greater than 1,000 customers per day. Optimum Voice provides customers 

with not only low cost voice service but an array of advanced features not previously 

available. For a flat fee of $34.95, Optimum Voice gives customers limitless local, 

regional and long distance calling as well as advanced calling features—a substantial discount over less robust ‘‘phone’’ service. It includes full E911 service and is 

capable of meeting law enforcement’s authorized requests for surveillance. 

Optimum Voice also includes a suite of IP applications that allow customers to 

forward calls to three different locations simultaneously, to send and retrieve voice 

messages on e-mail. An interactive web portal lets subscribers customize the way 

they want to receive voice communications day-by-day, hour-by-hour. In addition, 

our broadband network will allow customers to screen voice calls on their televisions 

and conduct audio or video conferences on their computer. We, like our cable colleagues, will continue to add dozens of new features that will make Optimum Voice 

an increasingly valuable communications tool for our customers. 

DEREGULATORY APPROACH TO VOIP SERVICES

The introduction of new technologies such as VoIP presents an opportunity to reexamine the rules applicable to voice entrants, and to develop a federal policy 

framework for VoIP that supports its continued rapid deployment. The appropriate 

policy framework would continue the availability of the right to interconnect and exchange traffic with other providers; the right to obtain telephone numbers; and the 

right to access the facilities and resources necessary to provide VoIP customers with 

full and efficient 911/E911 services. It is also critical to ensure a rational and equitable system of intercarrier compensation and to reform of universal service in a 

manner that maintains its goals while benefiting from the economic opportunities 

presented by new technologies. 

While advancing this approach, we recognize that VoIP providers have a responsibility to meet important social policy and security goals. Toward that end, the cable 

industry has worked closely with the FBI, the Justice Department and other law 

enforcement and public safety agencies and organizations to ensure that these security goals are met. 

We believe that this federal policy framework would enable VoIP providers to continue to innovate, earn a return on their investment, and compete freely while ensuring the fulfillment of important policy objectives. Most importantly, however, 

such an approach would continue to support the principle of a predictable, national 

framework for the development of these inherently interstate services. The legislaVerDate 0ct 09 2002 14:37 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00046 Fmt 6633 Sfmt 6621 F:\DOCS\20745.TXT HCOM1 PsN: JOEP
43

tion put forward by Representative Pickering last year offered a strong start toward 

achieving these goals, and we look forward to working the Committee this year. 

Although the primary focus of this hearing is voice over IP, there has been much 

talk lately about video over IP technology. Unlike VoIP, IP video services remain 

largely in the conceptual stage, with many economic and technical questions still 

to be answered. While these issues are not ripe for legislative action at this time, 

it would be appropriate for Congress to examine how the emergence of IP video may 

affect the whole media industry including such matters as non-discriminatory deployment, public, educational and governmental access, compensation to municipalities for use of the public rights-of-way, broadcaster and sports programming, localism, copyright, syndication, and the appropriate role of state and local governments. 

Any recommendations emerging from this review should be applicable to all multichannel video providers. 

In the meantime, all companies that propose to provide cable service, including 

telephone companies, must comply with existing Federal, State and local laws, including securing cable franchises prior to construction and not redlining neighborhoods perceived as less desirable. 

CONCLUSION

Today we are seeing a realignment of mass-market communications. This is an 

exciting new market for the cable industry and its customers, and a challenging opportunity for policymakers who are interested in facilitating the continued development of facilities-based competition in voice services. We look forward to continuing 

to work with the Committee to develop a public policy that fosters competition and 

consumer choice. 

Thank you again for this opportunity, and I welcome your questions.

Mr. UPTON. Thank you. 

Mr. Shlanta. 

STATEMENT OF MARK SHLANTA 

Mr. SHLANTA. Mr. Chairman, members of the committee, thank 

you for the opportunity to be here today. My name is Mark 

Shlanta, and I am the Chief Executive Officer of SDN Communications. I would like to thank you for inviting me to testify before you 

today and to provide a rural perspective as you look further into 

IP-enabled services and consider rewriting the Communications 

Act. 

SDN Communications is the information superhighway for South 

Dakota. Our story is one of innovation and cooperation by 27 South 

Dakota independent telephone companies to create the State’s most 

extensive fiber optic network. 

Today, SDN and its members provide Internet service to thousands of consumers, hundreds of commercial, and dozens of wholesale customers via our DSL, cable modem, and fixed wireless services. We have grown to become one of the regions top Internet providers by offering our customers access to multiple IP networks via 

one connection to SDN. In the future, we expect to serve more customers through developing additional centralized IP services. 

IP-enabled services and all communication services rely upon a 

healthy and robust infrastructure to reach end users. The one issue 

that must be resolved to ensure the existence of a robust, nationwide, ubiquitous communications network that can support IP-enabled and other advanced services in the future is cost recovery. 

Without adequate cost recovery, there will be no network for any 

communication services, including VoIP. 

The two main aspects for cost recovery that policymakers are 

talking most about are intercarrier compensation and universal 

service. Both are not simply regulations but are industry responsibilities. There is general consensus that the way in which funds 

44

are collected and allocated within these two industry responsibilities must be changed to meet the market realities of today. 

The solution for intercarrier compensation is a simple one. If any 

service provider uses another provider’s network, that service provider must compensate the other provider for the use of their facilities and at an appropriate rate. This notion is not complex. It is 

simply ensuring that all players stand up to their responsibilities. 

Many call intercarrier compensation or access charges an implicit 

subsidy. I call them a legitimate operating cost for a telecommunications provider. We have invested tens of millions of dollars to 

serve rural communities. If a carrier would rather come and build 

their own network instead of using ours for a nominal fee, they are 

welcome to do so. I ask you all to tell me why should a new service 

provider be able to access this network for free? We seem to be focusing this debate on why should new IP-enabled service providers 

be paying access charges. To those of us that toiled to finance the 

deployment of infrastructure, the question is why should they not. 

I agree that we do not want to bog down new entrants with unnecessary regulations, but allowing to skirt industry responsibilities is simply wrong. If a new provider’s business plan can’t accommodate playing by the rules and upholding industry responsibilities, then they shouldn’t be playing. IP-enabled service providers 

should be required to pay access charges when their services originate or terminate on the PSTN regardless of their regulatory classification. 

The solution for universal service is also a simple one. The base 

of contributors must be expanded to include all telecommunication 

service providers, including cable, wireless, and IP-enabled service 

providers since they benefit from the network. And yes, this quite 

possibly could mean small rural companies might end up contributing more tomorrow than they do today. It is a responsibility they 

are willing to share in, to ensure that all Americans, and not just 

the privileged, are able to enjoy the benefits of this technological 

era. 

Many policymakers and others seem to think that once a national broadband network is built there will be no more need for 

a universal service program, but that ignores the reality that networks must also be maintained and upgraded. The narrow band 

copper network has been around for over 100 years and yet there 

is still an urgent and recognized need for universal service support. 

Why do we believe that network upgrades and maintenance will be 

different in a broadband world? Despite technological advances, it 

is and will continue to be significantly more expensive to serve 

rural America, even after a ubiquitous broadband network is built. 

Universal service is a long-standing public policy goal and a goal 

I have got to believe we still want to flourish. Congress wrote universal service into law in 1934 and reinforced it in 1996 to ensure 

consumers in rural and high-cost areas have access to comparable 

and affordable telecommunication services. This has only been fully 

realized through the infrastructure deployed by community-based 

telecommunication providers who connect rural America to the rest 

of the world. These rural incumbent local exchange carrier networks serve approximately 40 percent of the geographic area of the 

United States and nearly 80 percent of my State and other rural 

45

States. Allowing new providers to use these networks without adequate compensation will compromise this network and then a lot 

of—and that is a lot of country to leave behind. Deploying advanced infrastructure that is fully capable of offering a combination 

of two-way voice, video, and data options should become the hallmark of our national universal service policy. 

Thank you, Mr. Chairman. 

[The prepared statement of Mark Shlanta follows:]

PREPARED STATEMENT OF MARK SHLANTA ON BEHALF OF THE NATIONAL

TELECOMMUNICATIONS COOPERATIVE ASSOCIATION

INTRODUCTION

Good morning. My name is Mark Shlanta. I am the Chief Executive Officer of 

SDN Communications of Sioux Falls, SD. I would like to thank you for inviting me 

to testify before you today to provide a rural perspective as you look further into 

IP-Enabled services and consider rewriting the Communications Act. 

COMPANY DYNAMICS

SDN Communications is the information superhighway for South Dakota and beyond. Its story is one of innovation and cooperation by 27 South Dakota independent 

telephone companies to create the state’s most extensive fiber optic network. 

Today the region’s premier healthcare facilities, banks, agricultural businesses 

and government agencies use SDN’s services for:

• Switched and dedicated long distance 

• Connecting the home office computers to those in branch locations 

• High-speed Internet 

• Video conferencing 

• Hardware to make the broadband connections work 

COMPANY AND IP

SDN Communications and its member owners have been offering Internet services since 1997. At that time, our service was simply dial up with several ‘‘high 

speed’’ customers being served via DS1 circuits. We began offering DSL, cable 

modem and fixed wireless services in 2000 to fulfill the growing need for greater 

connectivity speeds. Today SDN and its members provide service to thousands of 

consumer, hundreds of commercial, and dozens of wholesale customers. We have 

grown to become one of the regions top Internet providers by offering our customers 

access to multiple IP networks via one connection to SDN. This multiple IP network 

approach has allowed SDN to serve businesses from all across the country with data 

storage applications. In addition, our commercial customers can enjoy an Internet 

and long distance service via one connection to their office. In the future, we expect 

to serve more customers through developing centralized IP services. 

REGULATION OF IP

There is really only one issue that must be resolved to ensure the existence of 

a robust nationwide ubiquitous communications network that can support both IPenabled services and other advanced services. That one issue is full cost recovery. 

Without adequate cost recovery there will be no network for IP-enabled services, or 

any other type of services for that matter, to reach consumers be it wireline, wireless or some other medium. 

The two main aspects of cost recovery that policymakers and the public alike are 

talking most about are intercarrier compensation or as I like to call it ‘‘the cost of 

doing business’’—and universal service. These are not industry regulations; they are 

industry responsibilities. In general, I think the industry as a whole believes that 

the way in which funds are collected and distributed for intercarrier compensation 

and universal service must be changed to ensure our network continues to exist and 

be upgraded. The solution for intercarrier compensation is a simple one: if any service provider uses another provider’s network that service provider must compensate 

the other provider for the use of their facilities—at an appropriate rate. This notion 

is not complex; it is simply ensuring that all players stand up to their responsibilities of having the opportunity to partake in our capitalistic marketplace. The solution for universal service is also a simple one: the base of contributors must be expanded to include all telecommunications service providers—and yes, this quite posVerDate 0ct 09 2002 14:37 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6621 F:\DOCS\20745.TXT HCOM1 PsN: JOEP
46

sibly could mean that small rural companies might end up contributing more tomorrow then they do today. It is a responsibility we are willing to share to ensure that 

all Americans, and not just the privileged, are able to enjoy the benefits of this technological era. 

Many call intercarrier compensation or access charges an implicit subsidy. I call 

it a legitimate operating cost for a telecommunications provider. We have invested 

tens of millions of dollars to serve rural communities. If a carrier would rather come 

and build their own network instead of using ours for a nominal fee, they are welcome to do so. As an Internet provider myself, I compensate the owner of the Internet backbone that I must utilize to offer Internet services to my customers. I view 

this as a legitimate cost for providing Internet services to our customers. I recognize 

and accept that without use of their network I could not provide these services for 

my customers. I am therefore fortunate that the network resources are available to 

help me in providing my customers with the full array of advanced services that 

are available today. 

Tell me, why should a new service provider be able to access this network for 

free? This debate seems to be focused on whether new IP-enabled service providers 

should pay access charges. To those of us that toiled to finance the deployment of 

infrastructure the question is: why should they not? I understand that we don’t 

want to bog down new entrants with unnecessary regulations, but allowing them 

to skirt industry responsibilities is simply wrong. If a new provider’s business plan 

can’t accommodate playing by the rules and upholding industry responsibilities, 

then they probably shouldn’t be playing. After the 1996 Telecom Act, we saw a large 

influx of new telecom entrants. Unfortunately, many did not have sound business 

plans and were soon out of business or in bankruptcy. Thus, hampering investment 

in the telecommunications industry as a whole. We don’t want to recreate the boom/

bust scenario of that period by artificially incentivizing unsound businesses that 

cannot operate without regulatory arbitrage. 

I concur that the current patchwork of intercarrier compensation needs to be reformed, however it needs to be reformed in such a way to put all telecommunications services on a level playing field regardless of technology used. This regime 

should be cost based and applied equally across communications platforms. IP-enabled service providers should be required to pay access charges when their services 

originate or terminate on the PSTN, regardless of their regulatory classification as 

information or telecommunications service. Indeed, I believe these classifications are 

irrelevant in an IP world, where the functions that the network provides are what 

matters—not the service classification. Americans today uniformly rely on communications infrastructure and services to satisfy their commerce, safety, security, entertainment, and leisure needs. Moving forward, these needs will be met via a combination of 2-way voice, video, and data options. Consequently, deploying advanced 

infrastructure that is fully capable of offering such services should become the hallmark of our national universal service policy. 

Many policy-makers, think tanks and others seem to think that once a national 

broadband network is built there will be no more need for the universal service program. But aren’t we ignoring the large fact that networks must also be maintained 

and upgraded? Many people think that technological advancements will make universal service obsolete. The narrowband copper network has been around more than 

100 years, yet there is still an urgent and recognized need for universal service support. Why do we believe things will be different in a broadband world? In rural 

America, these costs are always going to be significantly more, even after a complete 

network is built. Yes, technological advancements are helping to reduce the cost, 

even in rural areas, but it still is always going to be more expensive to serve rural 

America due to low population density, expansive distances, and often-rugged terrain. Without continued universal service support our national goal of universal 

broadband access may never be realized. 

I feel the best way to reform universal service is to broaden the base of contributors to include all communications providers. Cable, wireless, and satellite 

broadband Internet access service providers, and VoIP and other IP-enabled service 

providers should contribute since they all benefit from the national network. 

Universal service is a long-standing public policy goal, and a goal I believe we still 

want to flourish. Congress wrote sections 254(b)(3) and 151 of the Communications 

Act of 1934 that states consumers in rural and high-cost areas should have access 

to comparable and affordable telecommunications services to ensure that this public 

policy goal was met. This has only been fully realized through the infrastructure deployed by community-based telecommunications providers who connect rural America to the rest of the world. These rural incumbent local exchange carrier networks 

serve approximately 40% of the geographic area of the United States and nearly 

80% of my state and other rural states. Allowing new providers to use these netVerDate 0ct 09 2002 14:37 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00050 Fmt 6633 Sfmt 6621 F:\DOCS\20745.TXT HCOM1 PsN: JOEP
47

1March/April issue of Rural Telecommunications Magazine 

works without adequate compensation will compromise this network and that is a 

lot of our country to leave behind. 

We are not asking for special treatment. We are only asking for a level playing 

field. All new entrants into the communications marketplace should uphold our current industry responsibilities of intercarrier compensation and universal service. 

Carriers that use our networks should provide us with just and equitable compensation just as we expect to pay them such compensation for the use of their networks. 

Again, all service providers and consumers benefit from a robust national network 

infrastructure. The current structure of cost recovery enabled us to achieve our impressive 94% telephone penetration rate. In order to achieve those same penetration 

rates with broadband and for whatever new technology will be offered after 

broadband we need to modify the existing regime but having the regime in place 

is absolutely critical. 

Interconnection and access to infrastructure, content, roaming, spectrum, rightsof-way, and adequate financing are all critical to the operational success of a nationwide integrated communications network. It is particularly important that such access be at appropriate rates, terms, and conditions. In light of the vertical integration that is taking place throughout the communications industry, it is more important than ever that mechanisms, such as prohibitions against nondisclosure agreements and strictly defined negotiating parameters are in place to ensure such access 

is a reality. In addition, government-mandated default rates, terms, and conditions 

that ensure full cost recovery for rural carriers should be applicable when negotiations fail. 

Throughout the course of our history, America has been recognized as a pre-eminent technological and economic force. Today however, many would have us believe 

we are losing that edge. How can this be considering the ingenuity and commitment 

that is displayed every day by leaders such as those making up the rural sector of 

the communications industry? 

Former Congressman and father of fiber optics, Amo Houghton, recently noted, 

‘‘For years, Corning and other optical equipment companies preached fiber to the 

home or ‘‘fiber to the premises’’ as the term has developed. We told the communications companies that they could generate more revenue and cut their maintenance 

costs, if they would extend fiber to the home or business. It had to happen ultimately, but we thought it would start in urban areas and roll out slowly to rural 

areas. We were wrong. The reverse happened. Instead, the pioneers were rural 

telcos and small municipalities. Some of NTCA’s members have been extremely visionary in this regard. I’ve always been impressed by how progressive and resourceful rural telcos are—I think they really embody the spirit of American enterprise—

always have.’’ 1

Rural carriers are using a multitude of technologies to bring broadband to their 

communities and will continue to be leading innovators in the broadband marketplace. 

We look forward to working with you as a full partner as you look to rewrite the 

Communications Act. Thank you again for inviting me to testify before you today. 

SUMMARY

IP-enabled services and all communications services rely upon a healthy and robust network infrastructure to reach end users. The one issue that must be resolved 

to ensure the existence of a robust nationwide ubiquitous communications network 

that can support IP-enabled and other advanced services in the future is cost recovery. Without adequate cost recovery there will be no network for any communications service, including VoIP, to reach consumers be it wireline, wireless or some 

other medium. 

The two main aspects of cost recovery that policymakers are talking most about 

are intercarrier compensation and universal service. Both are not simply regulations 

but are industry responsibilities. There is general consensus that the way in which 

funds are collected and distributed within these two industry responsibilities must 

be changed to meet the market realities of today. The solution for intercarrier compensation is a simple one: if any service provider uses another provider’s network 

that service provider must compensate the other provider for the use of their facilities at an appropriate rate. Carriers that invest millions in network infrastructure 

should receive compensation from those that utilize it in lieu of building their own 

network. 

The solution for universal service is also a simple one: the base of contributors 

must be expanded to include all telecommunications service providers, including 

48

cable, wireless, and satellite broadband, and IP-enabled service providers since they 

benefit from the network. Many policymakers and others seem to think that once 

a national broadband network is built there will be no more need for the universal 

service program. But that ignores the reality that networks must also be maintained 

and upgraded. Despite technological advances, it is, and will continue to be, significantly more expensive to serve rural America even after a ubiquitous broadband 

network is built. 

Again, all service providers and consumers benefit from a robust national network 

infrastructure. The current structure of cost recovery enabled us to achieve our impressive ninety-four percent national telephone penetration rate. In order to achieve 

those same penetration rates with broadband and what is after broadband we need 

to modify the existing cost recovery programs, but having the programs in place is 

absolutely critical.

Mr. UPTON. Well, thank you all. And thanks again for the disruption of the votes a little bit earlier this morning. 

Most of you touched on the universal service, Mr. Shlanta probably the most, and suggested that all communication service providers should contribute equally to the Universal Service Fund in 

order to sustain the fund. I would say that it is clear to most members that the Universal Service Fund does need, probably, more 

than a tune-up. It needs an overhaul. Some have suggested a flat 

fee per phone line as a solution. I would be interested in your 

thoughts and other thoughts that you might want to expand in 

terms of what we ought to do as it relates to VoIP for a level playing field for all of the different voice providers and, I guess with 

the exception of Mr. Melcher, Mr. Erickson, we will start with you 

to get your ideas and we will go down the line. 

Mr. ERICKSON. Thank you. 

My first reaction to the suggestion of a flat fee for a phone line, 

my concern with that is that it presumes the current technical 

structure of the network. In an IP-enabled voice service, connections are essentially transient and temporary. The same thing with 

number assignments. Numbers are just a temporary kind of addressing scheme, and they can be turned on and off. So I think that 

from a policy standpoint for universal service, my personal view is 

that a percentage of revenue is probably the easiest to implement. 

I understand there are huge complexities in terms of what revenue 

applies and what doesn’t, but I think trying to presume from a 

strategic perspective the ongoing structure of networks is, you 

know, I would hate to see us back in the same situation a few 

years from now when, you know, a phone line really isn’t a phone 

line anymore. 

Mr. UPTON. Mr. Grivner? 

Mr. GRIVNER. Yeah, I think that one of the difficulties with the 

phone line is it is kind of counter to what broadband is. Broadband 

is many phone lines. So it is difficult to say that you are going to 

apply a phone line concept to a broadband line, which could be 

technically or virtually 24 phone lines in that one line. So I think 

there is some validity to a percentage of revenue. I think that, as 

you said, the Universal Service Fund probably needs more than a 

tune-up. I think it needs a total look on how it is done and distributed. I think it needs to continue to exist but certainly not in its 

current form. 

Mr. UPTON. Ms. Puckett? 

Ms. PUCKETT. The key objective is to broaden the base. In terms 

of how, we don’t support a primary line, because you really build 

49

a network beyond a primary line. You don’t build a network primary line at a time. But we really could support a percent of revenue. Connection base is a little bit more concerning, just in terms 

of where the technology is going to go. But percent of revenue base, 

the key message here would be broaden the base. 

Mr. UPTON. Mr. Rutledge? 

Mr. RUTLEDGE. While we are currently paying into the USF, we 

do think an overhaul is probably in order, and if we are going to 

decide to raise this money, we need to consider what kinds of technologies can fulfill the public policy objectives, and I think there is 

a whole new world of opportunity in that direction. And in terms 

of collecting it, I think people will have phone numbers for a long 

time to come, and there are—if we do go with that scheme, there 

will be opportunities to arbitrage it, which will create problems, 

but it may be an opportunity for us. And we would be open to exploring that. 

Mr. UPTON. Mr. Shlanta? 

Mr. SHLANTA. Yes, Chairman Upton. As I stated in my testimony, I believe that contributions to universal service should be 

widened. It should include not only wireline and wireless, but IPenabled services. And I believe the simplest way to collect that universal service contribution is through a revenue-based contribution. 

Mr. UPTON. Mr. Erickson, in your testimony, you stated that 

States should have an active role in fostering competition and protecting their citizens. I am just curious what you think that role 

ought to be. Given that VoIP is an interstate service, how do 

States—what role should States have as they regulate an interstate service, if you meant that at all? I am not sure. 

Mr. ERICKSON. I did mean that. You know, to me—or my view 

is that the States are most active in ensuring that consumer requirements are met, and that includes public safety. They obviously fund support and with local municipalities emergency services. Obviously all of the, you know, fair business practices, those 

things are all—or many of them are enforced at the local level. I 

don’t believe that we need a lot of State involvement in the economic design of the intercompensation schemes and things like 

that, but I think, you know, in terms of ensuring that customers 

are being well served, I think local involvement is an important 

part of it. 

Mr. UPTON. Mr. Stupak. 

Mr. STUPAK. Thank you, Mr. Chairman. 

Mr. Chairman, first of all, I would like to ask unanimous consent 

to enter into the record a March 14 letter by the chairman. There 

are four of us with the Congressional rural caucus on—task force 

on telecommunications on—regarding the Level 3 forbearance petition. I would like to enter it into the record to supplement my 

opening statement, and I will ask them some questions along those 

lines. 

Mr. UPTON. Without objection. 

[The information referred to follows:]

50

CONGRESS OF THE UNITED STATES

HOUSE OF REPRESENTATIVES

March 14, 2005

The Honorable MICHAEL POWELL

Chairman 

Federal Communications Commission 

445 Twelfth Street SW 

Washington, DC 20554

DEAR CHAIRMAN POWELL: We are writing regarding the Level 3 forbearance petition currently pending before the Federal Communications Commission. As members of the Congressional Rural Caucus, we are concerned about the impact granting such a petition will have on rural telecommunications. 

We appreciate your attempts to develop a broad, comprehensive proceeding to 

deal with the complex set of issues posed by the current intercarrier compensation 

system. A comprehensive approach is the appropriate way to accomplish the difficult 

task of adapting that system to the evolving realities of today’s telecommunications 

marketplace. 

The Level 3 petition takes an opposite approach. It attempts to single out a narrow issue among this complex set of issues for immediate resolution. Such an approach would effectively prejudge some of the most important issues raised in the 

Commission’s broader proceeding, without necessarily taking into account the impact granting of the petition would have on intercarrier compensation, universal 

service, and rural telecommunications infrastructure as a whole. 

The Level 3 petition also contains what it claims is a ‘‘rural exemption.’’ Yet the 

petition itself excludes an unspecified number of rural markets from this protection 

immediately and exposes remaining rural markets to a case-by-case review and subsequent exclusion. 

We have strong concerns about the impact this petition would have on rural 

America, in the absence of comprehensive intercarrier compensation reform. Rural 

local carriers disproportionately rely upon access revenue and universal services 

support to make needed investments in telecommunications infrastructure. The 

Level 3 petition would result in the gradual erosion of these two vital funding 

sources. 

In conclusion, we urge you not to take a piecemeal approach by granting the Level 

3 petition. The FCC should continue to pursue a more comprehensive resolution to 

intercarrier compensation issues. 

Sincerely, 

JOHN PETERSON, Co-Chairman, Congressional Rural Caucus; ALLEN BOYD, CoChairman, Congressional Rural Caucus; GIL GUTKNECHT, Co-Chairman, Task 

Force on Telecommunications, Congressional Rural Caucus; BART STUPAK, CoChairman, Task Force on Telecommunications, Congressional Rural Caucus; 

LINCOLN DAVIS, Member of Congress; RICK BOUCHER, Member of Congress; 

PHIL ENGLISH, Member of Congress; BOB ETHERIDGE, Member of Congress; 

RUBEN HINOJOSA, Member of Congress; EARL POMEROY, Member of Congress; 

TOM LATHAM, Member of Congress JO ANN EMERSON, Member of Congress; 

JOHN MCHUGH, Member of Congress; and JERRY MORAN, Member of Congress

Mr. STUPAK. Thank you, Mr. Chairman. 

Ms. Puckett, if I may, those of us who serve rural areas here in 

Congress are particularly concerned about what we can do to get 

broadband built out to the more rural parts of America. You have 

given us a pretty good idea on what goes into a network to make 

it broadband compatible. While I know these are complex issues, 

can you help us by highlighting the top two or three policy initiatives that you would most effectively ensure—that would most effectively ensure that broadband is built out to rural America as 

quickly as possible? And then second, since we are talking a little 

bit about funding, the funding mechanisms for getting advanced 

services to rural America seems to be under an increasing level of 

attack. Even as companies like yours are investing aggressively to 

get broadband to all of your customers, what happens to your efforts to build out your networks if mechanisms like the intercarrier 

51

compensation and universal service are compromised? Would you 

care to comment on those two for me? 

Ms. PUCKETT. Thank you. 

In terms of the broadband build out, you know, broadband clearly—and I think you mentioned it in your opening comments, clearly 

enables the community’s economy. We believe—we have seen the 

economic development magic that happens with broadband. In 

terms of the opportunity there, looking at universal service in 

terms of offering a broadband connection I think is an option in 

broadening USF definition. Right now, it says advanced communication. How do you want to define that? Do you stop at voice, or 

do you allow broadband? So we would highly promote that. 

The second question about funding needs, what happens is basically a couple of things. In terms of Universal Service Fund, our 

company has experienced about a $10 million decline year over 

year—last year, 2004, than the prior year. And this year, we 

project, we are a public company by the way, about a $15 million 

decline. Public companies, you know, have responsibilities to shareholders to drive economies and to show that they are improving 

from a productivity cost efficiency standpoint. So I think that the 

USF fund needs to be relooked at. There is an indexing piece that 

for the first time has gone down. Access lines, when they actually 

developed the index back in the 1980’s, it was based on access line 

growth. They never assumed decline. And CPI, this is the first 

year, in 2005, that the index is not growing, that the fund will not 

grow because access lines have declined more than CPI. That is a 

very, very serious situation. I think we have a very near-term opportunity for that. 

And then just in addition, you know, just the responsibility to 

USF, the number of wireless CTCs that have been accepted. There 

is no fiduciary responsibility. You know, the States just have an 

open book. We are encouraged by the, hopefully, order that will be 

coming out from the FCC to at least make sure that there are 

standards for people who are accepting USF. The question is it is 

two different models. Do you want to be more regulated or you 

don’t at an executive level? 

Mr. STUPAK. Thank you. 

Mr. Erickson, there have been some questions about whether 

VoIP providers should be contributing along with all other types of 

providers to the Universal Service Fund and paying intercarrier 

compensation like the other providers. Since these are the two primary funding mechanisms that are making it possible to bring 

broadband to the most rural parts of America, isn’t it in your interest to support these mechanisms? Don’t your services need to ride 

on broadband facilities that others have built? And does your company currently pay to support either of these funding mechanisms 

today? 

Mr. ERICKSON. I do agree that we should be, as an industry, contributing toward universal service. Absolutely. I think we need to 

find a mechanism to do that in an efficient way, and the current 

structure makes it difficult for us to do that. Our services are defined as interstate, right now, what that would mean if we were 

applying it sort of strictly by the letter of the law, the 11-percent 

contribution factor would apply to all of our revenue, which is, you 

52

know, for regular phone companies it actually translates to more 

in the line of 2 percent or so. 

And to answer your second question, are we currently paying, we 

are not paying directly. We are paying indirectly, but we certainly 

would welcome the reform that would allow us to contribute in an 

obvious and transparent manner toward what we agree to be an 

important public——

Mr. STUPAK. How are you paying indirectly? 

Mr. ERICKSON. Through the payments that would—all of our 

services are terminated through other phone companies, and they 

are paying on their side into the Universal Service Fund for that 

traffic, so——

Mr. STUPAK. So you are paying them, and then they in theory 

pay into the Universal Service Fund? 

Mr. ERICKSON. Thank you, Mr. Chairman. 

Mr. UPTON. Mr. Pickering. 

Mr. PICKERING. Thank you, Mr. Chairman. 

If I could just ask a few questions as we try to develop legislation 

and consensus on the committee, some of the issues that—what I 

would like to see is your views and then put across the board. One, 

on the intercarrier compensation, my bill would require—that I introduced last year and it is my intent this year, a time certain for 

the FCC to complete the intercarrier compensation. Industry has 

had a chance to try to complete a volunteer agreement. I believe 

it has come close, but it is not yet done. I don’t know if a deadline 

in the FCC would be helpful to get the certainty and the requirement and the catalyst to achieve that, but would everybody on the 

panel support a requirement in legislation that would give a time 

certain, 180 days or some time period similar to that, for the FCC 

to complete an intercarrier compensation, taking into consideration 

the differences in rural markets and urban markets and looking at 

the best way to achieve a balance of all providers of telecommunication services or IP services. 

If I could, just quickly, would everybody support a time certain 

ICC—of the FCC? 

Ms. PUCKETT. Absolutely. 

Mr. ERICKSON. Yes. Yes, we would. Certainly it is important for 

us to make necessary investments and plan for the growth of our 

business in the network. 

Mr. MELCHER. If I may, I am not a carrier, but we have a dog 

in this fight, because every time you jump from an incumbent or 

certificated carrier to one of these other service providers, depending on who they are in the greater Houston area, I was 50 cents 

out of my budget, so as the wireline, as Ms. Puckett described as 

the wireline account is declining, so is my revenue. At the same 

time, we are having to spend a lot of infrastructure upgrade money 

to accommodate these new technologies. So the user pays that we 

have been working under in this country, everybody gets a 911 fee 

on their phone bill, has a direct impact on my success to be able 

to deploy technologies to meet this new challenge. So we are not 

a carrier, but we certainly have an interest. 

Mr. PICKERING. And would you support a mandatory compliance 

of cost recovery on E-911? 

53

Mr. MELCHER. I think that, like technology and revenue, as long 

as we are able to be made whole and recover the costs that we have 

to spend on these new technologies, we have to have some mechanism. Our public safety budgets already are somewhat overburdened, and they vary from State to State. But without the ability 

to recover those costs, we have no choice. We will end up cutting 

service. 

Mr. SHLANTA. Mr. Pickering, I believe that 180 days is too quick 

a timeline for the intercarrier compensation issues to be sorted out. 

I would encourage you, members of this committee, the same thing 

that I encouraged the FCC and that is to go slow. Take a comprehensive approach, as you examine all of the intercarrier compensation. There is more to intercarrier compensation than VoIP 

and access rates. 

Mr. PICKERING. Do you have a time period that you would suggest? 

Mr. SHLANTA. Twelve to 18 months would be a more sufficient 

period of time. It will take time. It is a complicated issue that 

needs a comprehensive review. To try to accelerate that I think it 

will force us to create decisions in a vacuum that will ultimately 

lead to more difficult items to reverse in the future. 

Ms. PUCKETT. Mr. Pickering, Karen Puckett. I would like to say 

one thing. I applaud the speed. As a businessperson, what we have 

here is a situation where all of us have questions about our business models. It is very hard to have the visibility in your strategic 

future on how to position your company if you don’t know what the 

rules are going to be. So be at level three, I mean, that petition is 

more than a year old. We have been around the table as an industry working on this. We are not starting at ground zero. And 

whether it is, you know, 18 months, 6 months, or 12 months, hopefully it is less than 12 months, but we have to have visibility to 

know how to position our businesses for the future. Thank you. 

Mr. PICKERING. We will call it a compromise at 9 months. How 

is that? 

Ms. PUCKETT. Okay. 

Mr. PICKERING. Universal service, the approach in the bill that 

I introduced last year was to say to the degree that there is interaction between the PSTN and IP over voice, there would be a contribution, a proportionate contribution to USF, and again taking 

into factors different in rural markets to urban markets. Is that an 

approach that everybody at the table would support? 

Mr. GRIVNER. I would support it. My concern would be is it too 

limiting, though, because especially when you are dealing with 

VoIP traffic that may touch the PSTN. I think you would have to, 

I think, when you start looking at these services and we start using 

terms like interstate, intrastate, and local, those terms are terms 

that are going away very quickly. And so therefore, I don’t know 

that I could define it that easily as just touching the PSTN. I would 

define it as a service that we are providing to consumers and customers. There needs to be some sort of even distribution on or off, 

either we regulate it or we don’t, in terms of attacks, and then it 

applies to all services. 

Mr. MELCHER. And touching the PSTN to get to 911 right now 

is the standard, off-the-shelf solution. But like in our own shop, we 

54

are developing these next generation tools. As a matter of fact, we 

have already tested them, so one of these providers could come directly into our shop without ever touching the PSTN, and we have 

got 43 dispatch centers around Houston that would never be included in that model, so that has to be taken into account as well. 

Mr. PICKERING. One final question before my time expires. 

As I understand it, Vonage and other IP-related services, to be 

able to complete a 911 call, have to have access to the tandems on 

the routers, especially from the Bell companies. Currently, there is 

some progress but not complete acceptance from the Bell companies 

as far as allowing IP companies to have interconnection at the tandem, which is required to make the—to complete a 911 call. I think 

the situation that we will hear later, or the example in Houston, 

is a perfect example. Should we require, as we go forward on this, 

interconnection for IP networks and applications, at least to the 

tandem of the incumbent networks? 

Mr. MELCHER. For the majority of the country, that is the only 

way you are going to get into a 911 piece app, so the short answer 

is yes. As we look to next generation 911 infrastructure, which we 

are aggressively pursuing in Texas, and I believe in the next 18 

months—actually, in the next few months, you will see some of this 

traffic routed directly into the piece apps, but for the majority of 

Texas, I think you will see a lot of next generation work over the 

next 18 months where it wouldn’t have to go through an incumbent 

selective routing tandem. It could go through, you know, the 911 

selective routing cloud, if you will. But unfortunately, the majority 

of the infrastructure out there for 911 is very, very beholden to 

that incumbent local exchange carrier tandem. And without access 

to that and access to the data base as well, you will not see calls 

delivered to 911 piece apps in this country. 

Ms. PUCKETT. Mr. Pickering, I would just like to make one point. 

Public safety is very, very important, but I would ask that there 

is some respect for the burden put on some of the telecommunication companies. You know, we have spent millions of dollars preparing, and this is our own data base. And these companies that 

want to come and play, if 911 is an important part of their value 

proposition to the marketplace, that is the cost of doing business, 

and they need to get with it. 

Mr. SHLANTA. Mr. Pickering——

Mr. PICKERING. But you wouldn’t deny them access to your 

tandems, would you? 

Ms. PUCKETT. No, but I would just ask that we wouldn’t carry 

the incremental burden of connecting them and whatever infrastructure is required. 

Mr. PICKERING. There should be some compensation. 

Ms. PUCKETT. Correct, sir. 

Mr. SHLANTA. Mr. Pickering, that is exactly what I was going to 

say. I believe that 911 and emergency services are a responsibility. 

They are not an expense, as they have been indicated earlier in 

terms of VoIP companies looking at them from a profitability 

standpoint. And with that responsibility, as Ms. Puckett indicated, 

the telecommunication companies across the country have invested 

millions of dollars in developing these data bases. It should have—

55

and should expect adequate cost recovery for access to those data 

bases and access to those routing services. 

Mr. PICKERING. Thank you, Mr. Chairman. 

Mr. UPTON. Mr. Gonzalez. 

Mr. GONZALEZ. Thank you very much, Mr. Chairman. 

And I am going to leave all of the other questions regarding regulation policy and the consequences in the bigger picture, and I am 

just going to get down to some practicalities and experiences in San 

Antonio and questions that constituents will pose. And I want 

some—your opinion on it. And of course, this question is more directed to Mr. Melcher. 

The tragic experience of the John family, of course, stands out. 

When a cable company comes—let us say when they approach the 

John family, are they notified that if you dial 911 that it is—there 

is not going to be a connection? I mean, I know you are going to 

get the recording, but that is after the fact. That is insanity. But 

is there any requirement—I can see that maybe there may be some 

sort of legal responsibility and liability and I guess you would have 

to see what the courts think, but beyond that? 

Mr. MELCHER. It depends on the carrier, Congressman. The cable 

providers in Texas, at least, are doing full-borne 911, and so there 

is really no disclosure there required. The others, as in Mr. John’s 

cause, got his service from one of the ISP type providers. And although if you sign up for it on their website, they have some disclaimer information that you have to accept and there is some fine 

line there between disclaimer equals real disclosure in our minds, 

from a consumer perspective, but in this case, he picked up the 

newspaper ad and dialed their 1-866 number and signed up for it 

over the phone. So there was no disclaimer, no disclosure, no nothing. They took his order. He got his service and didn’t know he 

didn’t have 911 until his daughter picked up the phone and needed 

it that day. 

Mr. GONZALEZ. How about home security systems? I have been 

told by individuals that install these things that you need a 

wireline. In other words, what happens if you have a silent alarm 

or any type of alarm and it is triggered because you have an intruder or whatever it is, an alarm goes out, and what happens is 

the signal goes out by the wireline, the hard-line, and then to the 

center. The center then calls the home. If you are there, you answer and you give them the code word, if you can member it, and 

so on. But let us just say something is happening. It disables that 

system, doesn’t it, if you have Voice-over IP? 

Mr. MELCHER. Again, it depends on the technology. If it is a system that has no battery backup and the power is out, then it will 

not work. There are some of these IP technologies that don’t support fax or TDD devices, telecommunications devices for deaf and 

hard of hearing persons, because they use FSK or other types of 

signaling. Some of the IP providers do. That technology is getting 

better, but your observation is very correct, sir. It depends on the 

type of technology, but some do not support that type of activity. 

Mr. GONZALEZ. Again, is there any requirement anywhere that 

would—that the cable company that comes and has you switch over 

to advise the consumer that this disables their security system, or 

one aspect of it anyway, the most important? 

56

Mr. MELCHER. There is no written regulation that we are aware 

of, sir, and we are totally relying on their voluntary compliance to 

those types of disclosures. 

Mr. GONZALEZ. And that probably won’t happen, right, because 

that may be a determinate factor for someone to not subscribe. 

Simply saying what do I have to do in order to make sure that my 

alarm system, which I spend so much every month and had so 

much to install, is going to work? 

Mr. MELCHER. We launched a huge press conference and campaign yesterday in Texas that basically said buyer beware. You 

need to check out the technology that you are purchasing to make 

sure it is going to do all that you want to do, like 911—enhanced 

911 and those other types of issues. Will it do security? Will it do 

fax? The buyer needs to be aware and be educated as to what the 

limitations are of the service that they are purchasing. 

Mr. GONZALEZ. What do you believe is the responsibility of the 

provider of Voice-over IP? 

Mr. MELCHER. Well, as a public servant, it is my job to protect 

the public. And as public servants, all of us, our first and primary 

goal, I think, should be public safety. I understand the arguments 

and I understand the costs and I understand all of those arguments that you have heard, but the bottom line is we have people 

out there that think they are getting a different kind of ‘‘phone 

service,’’ and they expect that 911 is a part of that. Any degradation to fully enhanced 911 is ridiculous, because it is not technically a barrier. There is no reason for them not to have that kind 

of service. It might be an economic issue and there might be some 

incumbent access issues, and those are all true issues, but there is 

no reason to offer a telecommunications service that doesn’t have 

911 as part of your business plan. 

Mr. GONZALEZ. Okay. And any of the other witnesses are free at 

this time, if they have an opinion regarding, not just 911 but what 

I am eluding to, of course, is what happens when it disables alarm 

systems and consumers are not being advised. 

Mr. Rutledge? 

Mr. RUTLEDGE. Our company provides the capability of using 

your alarm system with the Voice-over IP products we are installing. We have also installed E-911, and we are currently working 

on hearing impaired services, which we have not yet launched but 

plan to launch. And so we have been rolling out our product and 

adding additional features to it, as we develop the product and as 

technology gets integrated in such a way that it is practical to offer 

it to the marketplace. But I think we have a responsibility to tell 

all of our customers exactly what our service does and what it does 

not do. We have chosen to offer E-911, because we think it is good 

for our customers to have. It is good for us to provide it. We think 

there is an expectation in our marketplace that when you have a 

phone service that you are going to get that product from us. And 

so we voluntarily provide it, and we are trying to make all of the 

functionality that people are used to in what they consider their 

phone service to work on our network and then add much more to 

it so there is an even greater value than what was traditionally offered. 

57

Mr. GONZALEZ. Is there additional cost when you provide this 

service, whether it is the 911 capability, but especially the security 

alarm systems? 

Mr. RUTLEDGE. No, we have one flat fee no matter what, no matter how much you use it or where you call. 

Mr. GONZALEZ. Thank you. 

Anyone else? 

Mr. Chairman, thank you very much. 

Mr. UPTON. Mr. Bass. 

Mr. BASS. Thank you, Mr. Chairman. 

Mr. Shlanta, you mentioned that you needed adequate cost recovery for access to the data bases. Do you have any—could you give 

us any further details as to how that cost will be recovered and 

what it would be and how that would work? 

Mr. SHLANTA. Well, I think that is part of the intercarrier compensation rates that need to be developed. The companies have 

spent millions of dollars developing the data bases, and as I indicated in my testimony, I will consider those data bases part of the 

network infrastructure. Any upgrade and maintenance of network 

infrastructure is—requires adequate cost recovery to ensure that 

those are done. 

Mr. BASS. Can—all right. So at present, States regulate 911 access. We have pretty much agreed that the Federal Communications Commission should have sole jurisdiction over VoIP regulation. How does that all work? Maybe, Mr. Melcher, you could start. 

And who would decide—I would just like to know how that whole 

system would work. 

Mr. MELCHER. Actually, we think that the Congress’s intention 

to, you know, leave the industry somewhat unfettered so that it 

can grow, we don’t have a problem with that. We do see a role for 

the Commission to play in the interim. There are some technological things that next generation access needs to have worked 

out. Our agency, along with NENA and several universities, are 

looking at those models, and that those solutions are coming very 

quickly. 

But access into the 911 system, I think does need to have some 

type of leadership, and the Commission has a docket open on that. 

And the commissioners that—I have spoken to all of the commissioners and the chairman, the outgoing chairman, and they have 

all expressed a willingness to take the 911 piece from that docket 

and accelerate it. And some interim rulemaking on that, I think, 

would be very helpful. I don’t think it would be overly burdensome, 

because as you have heard today and before, most of the players 

are wanting to—even the ones that aren’t doing it now, are wanting to, and they are working very aggressively toward integrating 

into 911. So I don’t think you are going to get a whole lot of 

pushback on that. A little bit of interim rulemaking at the Commission would certainly suffice in the meantime while Congress deals 

with the rewrite of the act. 

Mr. BASS. So interim rulemaking, do you think the FCC could 

handle E-911 from VoIP just the same way they handle it for wireless? 

Mr. MELCHER. I think they are at a better posture to handle it 

for VoIP than wireless. I think so many lessons have been learned 

58

in wireless 911 that I believe not only is the Commission better 

equipped to handle it, but I think the public safety community and 

the telecommunication industry is better equipped to handle 911. 

Mr. BASS. Anybody else have any other comments on that? If not, 

I will yield back. 

Mr. UPTON. Mr. Boucher. 

Mr. BOUCHER. Well, thank you very much, Mr. Chairman. 

I have laryngitis today, and so I apologize for this raspy voice. 

I want to express appreciation to our panel for sharing their 

views with us on IP-enabled services and VoIP in particular. I have 

listened very attentively to what you have had to say, and I think 

you have offered some very helpful viewpoints. 

I have a couple of key questions. We have had one example to 

date that has been largely reported and some less well reported 

suggestions that other examples have occurred where broadband 

platform owners have engaged in a practice to disable access by 

their broadband customers to the websites of people who offer a 

competing service. The one example that was widely reported was 

a local exchange carrier engaging in port blocking to prevent its 

customers from accessing Vonage to enjoy VoIP service. And there 

are suggestions that this is not the only such incident. My concern 

is that if we don’t have a clear rule that says you can’t do this, if 

you are a broadband platform owner, we should have a rule, in my 

opinion, that says that you may not discriminate among the bits 

that are traveling across the platform you operate. And you certainly can’t do it in a way that favors a content service that you 

offer to the disadvantage of a content service offered by a competitor that has a website somewhere out on the Internet. 

This rule would be very simple and would say that a platform 

owner may not disable access to any website on the web and particularly could not do that in order to engage in anti-competitive 

conduct and favor its own service over the service offered by someone else. So in practical terms, the cable operator offering telephony could not disable access through its cable modem service to a 

VoIP provider, such as either of the gentlemen we have here today. 

A telephone company offering DSL service would have to play by 

exactly the same rules. And any other broadband provider would 

be required, in effect, to respect network neutrality. 

And this is a principle that was strongly endorsed by Commissioner Powell during his tenure as Chairman of the FCC, which 

ends very shortly. He decided not to translate that support for network neutrality into a Commission rule. I had hoped that he would 

do that. That has not been done as of now. We have the rewrite 

of the 1996 Act coming up, and we have an opportunity to insert 

this very common sense principle of network operation into the 

statute. I am inclined to do that, and I would welcome your views 

on whether or not that is a good idea. 

Let us start with Mr. Erickson and Mr. Grivner. 

Mr. ERICKSON. Sure. Well, obviously, as someone who requires 

unfettered access to those broadband, we strongly would endorse 

that. I would also take it a step further and would ask to separate 

it from the larger question of the Telecommunications Act rewrite. 

In my opinion, this is something we—as I mentioned in my testimony, we recently completed a consumer poll, and only 3 percent 

59

of consumers of the 2,000 we talked to, said that it was legitimate 

for a broadband provider to interfere in any way, disrupt any form 

of service application or content over a broadband pipe. So the—

you know, our constituents, all of us, our customers and your constituents clearly are in favor of aggressive action to ensure that, 

you know, that inference never happens. 

Mr. BOUCHER. Thank you very much. 

That was just a great answer, by the way. 

Mr. Grivner. 

Mr. GRIVNER. Congressman, I would agree with your proposal. If 

you look at the chart that Ms. Puckett was so kind to bring with 

her today, if you look at the bottom of that chart, that is where—

I would argue that that is where you see more regulation. And 

then as you move up the chart, you see less regulation. So I think 

your proposal, as it hits the first two layers of that chart, does 

make a lot of sense. 

Mr. BOUCHER. Thank you very much. 

Others who would care to comment? 

Ms. Puckett? 

Ms. PUCKETT. Thank you very much. And I am glad I brought 

the chart, because I think it visually helps here. I don’t disagree, 

but I think there are a few things that we need to clarify here. The 

bottom of the chart, the question is the chart, depending on the 

value proposition, let us just say like Vonage, who doesn’t have facility base, they could be at the top of the chart, and the cable provider could be at the bottom of the chart, right. Who is accountable 

in between? It is not clear. I think clarity is what we need here. 

And I think we have to be careful with discriminating the difference of blocking and service degradation. Sometimes there is a 

very significant issue happening on the Internet with viruses, and 

service providers are impacted by viruses. And it impacts their 

ports, which appears to be blockage, and I want to get—I don’t 

want to outrun my technical headlights here, okay, but I do know 

that we are—we, the industry, has had significant issues with the 

viruses and how it impacts ports——

Mr. BOUCHER. Well, Ms. Puckett, let me interject. I don’t think 

anyone would disagree that broadband operators have an obligation to conduct their platform operations in a way that promotes 

network security, and if security is the issue, then that is one 

thing. And obviously, managing the network with that objective in 

mind is fine. But to manage it in such a way as to disable access 

to a competitor’s website because you don’t want that company 

competing with you is wrong. You would agree with that, wouldn’t 

you? 

Ms. PUCKETT. I would absolutely agree with that. 

Mr. BOUCHER. Great. 

Ms. PUCKETT. And I also would agree that you also need to be 

able to identify the traffic——

Mr. BOUCHER. Right. 

Ms. PUCKETT. [continuing] and it needs to be clear on how you 

are compensating and what the arrangements are between the two 

parties. 

Mr. BOUCHER. That is great. Thanks. 

60

Mr. Melcher, I saw you nodding your head. I assume you agree 

with the proposal? 

Mr. MELCHER. I do, because, you know, blocking another provider’s content can be equated sometimes to blocking access to our 

facilities as well. And although it is IP to IP in the model that you 

put out there, ours could also be IP to IP. And as those of us who 

are more aggressive in building these next generation platforms, 

that would be a significant issue for us, and we appreciate your 

recognition. 

Mr. BOUCHER. Mr. Rutledge, surely the cable industry would 

agree this is a good principle? 

Mr. RUTLEDGE. I don’t think there is any example of any cable 

operator blocking sites on broadband networks. In fact, our whole 

opportunity as a broadband operator and the networks we have 

built is to sell more subscriptions. And when people buy subscriptions to our service, they get access to sites. And we actually like 

the fact that sites are getting richer. And the fact that sites are 

richer requires more broadband capability. And because our networks, we think, are superior to our competitors, that gives us a 

marketplace opportunity to succeed. So I don’t think, from our 

point of view, we see a problem. And—but our networks are, in essence, open. 

Mr. BOUCHER. Well, let me just add that—and again, we are 

talking about rumor here more than anything else, because I don’t 

have a solid report of this. But I read in one of the communications 

publications that circulates around the Hill on a daily basis just 

yesterday that there now is a suggestion that a cable company has, 

in fact, engaged in port blocking with respect to an independent 

provider of a competing service. So I am not saying that is necessarily true, but the rumor is certainly out there, and I suspect 

we are going to find out more about that in the days to come. 

Let me give the final witness, Mr. Shlanta, an opportunity to 

comment, if you would like. 

Mr. SHLANTA. Certainly. I guess I don’t agree that we need separate legislation regarding the port blocking. I think it is all part of 

the intercarrier compensation discussion. I don’t think that the——

Mr. BOUCHER. So you pay to get access, and if you don’t pay, you 

can be blocked? Is that what you are saying? 

Mr. SHLANTA. No, I think what you had said was there are some 

rumored reports of, perhaps, a cable company——

Mr. BOUCHER. No. No. Well, no, we have a firm report that a 

local exchange carrier did in fact block access to Vonage. Now that 

is clear. And the FCC did undertake a proceeding with respect to 

that particular instance. What we do not know for certain is if 

there are other examples of that, although we are hearing through 

the grapevine and through some reports that unidentified 

broadband operators have, in fact, engaged in this practice. My 

concern is if we don’t have a rule that says you can’t do this, and 

it is a pretty simple rule, and I think most people with common 

sense would agree that it is appropriate, we are going to see more 

examples. 

Mr. Chairman, I know my time is up, and I appreciate your patience. Thank you very much. 

Mr. UPTON. Thank you. 

61

Mr. Barton. 

Chairman BARTON. Thank you, Mr. Chairman. 

My questions are not quite as technical intense as Mr. Boucher’s. 

He is our resident intellectual telecommunications expert. I am just 

one of the laymen on the committee, but I am the chairman, so 

that helps a little bit. 

My first is more of a comment than a question. I hate this acronym of VoIP. Nobody knows what VoIP is, and you know, it is like 

some character in Star Wars or something. I have come up with 

a different acronym, and I just want to try it on you folks and see 

what you think about it. I have tried it on Ed Markey. He doesn’t 

like it, but that might mean it is a good thing, I don’t know. 

Mr. UPTON. I liked it. I want you to know I liked it. 

Chairman BARTON. Yeah. Well, Mr. Upton likes it. 

How about BIT or BITS for Broadband Internet Telecommunication Services, because VoIP is really voice. We are really talking 

about broadband and Internet and telecommunications. So if—I 

may start using BIT or BITS if you folks would start using it, too. 

Mr. MELCHER. I will take some of that. 

Chairman BARTON. You like that? 

Mr. MELCHER. Sure. 

Chairman BARTON. I mean, if you don’t like BIT or BITS, come 

up with something you do like, because VoIP—I would hate to, 20 

years from now, having to be doing a town meeting, if I am still 

in Congress, talking about VoIP. But BIT, because you have got 

data bit, it just seems a little bit better. 

So anyway, that is a food for thought. Boucher is over there grinning about that. 

First, as a general question, in the Internet age, with everything 

you folks are doing, is there a Federal requirement for a statute 

that requires universal service? If you were me, would you, in the 

telecommunication rewrite that we are about to do, would you repeal the universal service requirement? 

Mr. GRIVNER. I will start. 

I would reform it. I wouldn’t repeal it, and I would make it applicable to all, not just some. I think it——

Chairman BARTON. When you say make it applicable to all, do 

you mean everybody at this table? 

Mr. GRIVNER. Everybody at this table, and some that aren’t even 

here. 

Chairman BARTON. Including our cable representative? 

Mr. GRIVNER. Well, yes, I would say that. Obviously, he is going 

to say no. But yes, applicable to everyone at all—and equally, that 

way—because, as you said with your term, I agree with you on 

VoIP it is actually like when people converted from radio to television and they looked very much on television the first time like 

they were on the radio. And that is what VoIP is. It is kind of a—

the first application to move over, and I think it is going to become 

a very old term very quickly. 

And so I do agree. I think that universal service needs to be reformed, applicable to all. I think that you can look at some creative 

ideas that take some of the fund and, as we talked about enhanced 

911, carve out some of the fund to do some research and developVerDate 0ct 09 2002 14:37 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00065 Fmt 6633 Sfmt 6602 F:\DOCS\20745.TXT HCOM1 PsN: JOEP
62

ment on enhanced 911 services for the future of telecommunications, not looking back on how——

Chairman BARTON. Is there anybody on the panel that would 

vote to repeal it? Most of you are providing services that don’t benefit from a universal service requirement. 

Mr. ERICKSON. We understand this important public policy goal. 

I think I would agree with the people on the panel who said that 

is important to broaden the rate base. I think from a consumer 

standpoint, it gets a little complicated because, as we have done 

with our services and, you know, cable companies have done with 

theirs, what consumers like is to buy a package of services, and 

these services are to get converged together. And so you end up 

paying, you know, $90 for something that includes content services 

and voice services and other forms of communication service. So it 

gets a little hard to sort of parcel the revenue, if you will, to say, 

‘‘Well, this portion of the revenue or service is subject to those kind 

of subsidies.’’ But I think overall——

Chairman BARTON. Well, overall, we have established that everybody is for universal service, so that means you all want to help 

pay for it, is that right, not just the current phone companies but 

all of you, Mr. Sun down there, and the lady here, you are all going 

to willingly pay something into the Universal Service Fund? 

Mr. GRIVNER. Well, I am already paying close to $100 million a 

year, 11 percent of my revenue, so the way I look at it, I will probably end up paying less. 

Chairman BARTON. Okay. My cable man wanted to say something, I think. 

Mr. RUTLEDGE. I wanted to say that, you know, it is in our interest for our voice customers to be able to complete their call to someone in a rural area, so there is value in that for us as a company. 

I do think the definition of what the service of universal service is 

needs to be updated. I think the concept arose in an era of wireline 

telephony, and the real question is what do we want to provide the 

people universally and then what ways can you do it. And those 

are very complicated questions that I think need to be addressed. 

That done properly I think——

Chairman BARTON. This committee doesn’t do anything unless it 

does it properly. That is the stipulation. So——

Mr. RUTLEDGE. And—well, I assumed that. 

Chairman BARTON. We may need your help to determine what 

proper is. 

Mr. RUTLEDGE. Yes. But that, you know, that said, then I think 

we need—then it needs to be funded, and we are willing to work 

on a mechanism to do that. 

Chairman BARTON. Well, my time is expired, Mr. Chairman. I 

am semi-serious about BITS. That may not be the perfect one, but 

please help us come up with something different than VoIP. And 

I chose BITS because of the Internet telecommunication services, 

and it is, you know, broadband, technically speaking, would include 

everything including wireless broadband. 

Thank you, Mr. Chairman. 

Mr. UPTON. Thank you. 

Ms. Blackburn. 

Ms. BLACKBURN. Thank you, Mr. Chairman. 

63

And I want to say thank you to each of you, and I know we have 

run in and out of here today with meetings and votes, and thank 

you for your patience. We appreciate that. And we are always as 

absent as we appear. Sometimes we are in the back holding meetings. 

You know, the chairman has got a great point there talking 

about BITS. And I think it is going to get even more difficult for 

us. You know, we talk about Voice-over IP, or VoIP as he is saying, 

but now really it is everything over IP, as one of our witnesses at 

a hearing said last week, and I don’t know how we would take 

those three vowels and one consonant and come up with some kind 

of term that we could even begin to pronounce. 

I do have just a couple of questions that I want to follow up with 

you all on. I want to—let us talk about the Federal-State interface 

for just a few minutes on this. I want to be sure everybody on this 

witness panel concurs that Voice-over IP is an interstate commerce 

issue, it is an interstate issue. Is there—am I reading your testimonies and hearing your comments to come to the conclusion that 

you all agree it is an interstate issue? 

Mr. GRIVNER. Well, a clarifying point. As I said earlier, I think 

that the terms that we have used in the past describe communication services, inter, intra, international, or local I think are not 

useable in this context. It is basically a service that I could call 

across the room, across town, across the world and using that kind 

of service. So in many cases, we are applying a previous thought 

process to a new kind of service. So while I agree with your 

premise that the FCC needs to rule over that from an interstate 

perspective, again, I think that is a term that is becoming—has 

seen its better days. 

Ms. BLACKBURN. Thank you, sir. 

Mr. Erickson, you had stated that States should have an active 

role in fostering competition and protecting their citizens. And I 

want you to elaborate for just one moment, if you will, on what 

that role should be. 

Mr. ERICKSON. Historically, obviously, the States have always 

participated in Federal proceedings, and I am just suggesting that 

they continue to do so, that we will cooperate as best we can and 

work together to try to create with the States’ participation a common national framework for things that do require action and involvement of State authorities. 

Ms. BLACKBURN. Okay. All right. As we look at the Voice-over IP, 

which is where we are right now, and consider the implications of 

convergence as we move forward, and we know that with Voiceover IP, a customer gets their voice application from one provider, 

like SunRocket and they get the broadband facilities from something like Cablevision or CenturyTel, and there exists the possibility of some extended service outages where both companies 

blame the other, and the customer is—will feel powerless. And this 

is going to be one of those customer services issues that we know 

we are going to get calls about. And it is going to be left for somebody to handle. 

So looking forward, who should sort out these sort of service outages? Where should the responsibility lie? Should that be State 

commissions? Should it be the FCC? Should it be the courts? 

64

Should it just be left to the markets to the competition getting into 

the market? Where should the responsibility on that lie? 

Mr. GRIVNER. Well, in actuality we have that problem today, because, for example, in my case, XO Communications, we provide 

service to business customers but in many cases, that last mile of 

connectivity is provided by a regional Bell operating company. But 

the customer looks to us as that primary interface and will keep 

their service with us or take it away based on their overall performance of being able to manage our, in this case, subcontractors. 

So in our case, I think it belongs to the primary provider. And in 

many cases, it would go back to a State jurisdiction in terms of 

complaints or issues with service with XO on a local basis. 

Ms. BLACKBURN. Okay. Thank you. My time is expired. Thank 

you. 

Mr. UPTON. We recognize Mr. Stearns. 

Mr. STEARNS. Thank you, Mr. Chairman. 

I don’t know if this question has come up with portability of 

numbers. I think—do any of the witnesses disagree that the number of portability should be available for VoIP customers? Let me 

just start from my left to right. 

Mr. GRIVNER. It absolutely is essential for our customers. 

Mr. SHLANTA. Agree. 

Mr. STEARNS. Anybody disagree? 

Okay. Mr. Grivner, it seems from your testimony that you want 

to continue for IP services the same kind of unbundled access regime that you enjoy for telecommunications services. 

Mr. GRIVNER. That is correct. 

Mr. STEARNS. One of the benefits of VoIP services is that it rides 

a broadband pipe without requiring the VoIP provided to need 

unbundled access to the last mile facilities. Given that, why should 

Congress perpetuate an unbundled access regime in an Internet 

Protocol world? 

Mr. GRIVNER. First of all, Congressman, IP is software that rides 

on some sort of physical asset. That physical asset to the customer, 

that last mile of connectivity is still controlled by a few companies, 

primarily the Bell operating companies, or in some cases, the cable 

companies, but not so much as it relates to business customers. So 

that last piece of copper, that last piece of fiber is still going to be 

a bottleneck, regardless of the service that rides on top of it, whether it is VoIP or BITS. That service is still going to be bottlenecked 

by that last piece of copper or fiber to the customer. That is not 

going to change regardless, because economically, there are issues 

with building, going into buildings, digging up streets to continue 

to build to that last mile of connectivity, so that is not going to 

change in the foreseeable future. It will at some point when wireless broadband becomes available, but that is not in the foreseeable 

future. 

Mr. STEARNS. Anyone else? 

And also, Mr. Grivner, this broadband wireless offering you have, 

in my—I represent part of Jacksonville, Florida, and Clear Wire is 

being deployed in Jacksonville, which I understand has just begun 

to offer VoIP. Maybe if you could just explain a little bit about 

what you are offering. 

65

Mr. GRIVNER. What we are offering—we purchased some spec- trum several years ago for about $1 billion. It is called LMDS. It 

is fixed wireless spectrum, so it is a licenses spectrum. And what 

we are offering in San Diego, Los Angeles, Dallas, and very soon 

in Florida, most of the State of Florida, is a fixed wireless capability. In California right now and in Dallas, we are offering that 

as a direct solution to end-user customers. And basically, it eliminates that last mile of copper or fiber to those customers. What we 

are doing or potentially going to do in Florida here in the next 5 

to 6 months is working with a cellular provider using that capability to back-haul their wireless from their wireless towers to central offices. 

So that capability exists in other countries. If you look at Europe 

or Asia, they have deployed it quite heavily. One of the reasons is 

that when you don’t have a competitive environment, like you do 

in the United States, a lot of the pricing is artificially high, so 

therefore it has been very easy for wireless broadband providers to 

come into those markets and deploy those technologies. That technology in the United States I think is only years away as the prices 

of that technology continue to decline. So I think it is going to be 

an option. Clear Wire was founded by Craig McConnell, who also 

founded XO many years ago. I think he has got a very good idea. 

I think it is a very innovative idea to provide wireless broadband 

to residential and potentially businesses at some point in time, and 

I think that dream will become a reality within 3 to 5 years. 

Mr. STEARNS. For the—not just the commercial market but for 

the——

Mr. GRIVNER. Consumer. 

Mr. STEARNS. [continuing] consumer, too? 

Mr. GRIVNER. Yes. 

Mr. STEARNS. Well, that is—you know, Clear Wire probably is on, 

just as you are, probably the leading edge of a new concept here. 

And this fixed wire is something that anybody can get into or is 

it confined to if you have the money you can get into it? 

Mr. GRIVNER. I think you need money one way or another, because——

Mr. STEARNS. One way or the other. 

Mr. GRIVNER. [continuing] you will have to pay for the electronics, and there is still a price associated with building the towers. I think the bottleneck that we will all run into at some point 

in time, potentially, it is kind of interesting, we will move from this 

copper bottleneck to the building owners that have the rooftop 

rights where we have got to put cell sites up or something along 

those lines. But that technology is going to continue evolve. It is 

coming from companies like Hughes and Erickson and companies 

in the Far East, and the prices are getting less and less. So I do 

think it will become available, and I think when we talk about the 

wireline connection, I think it will go away or certainly not be as 

much of an issue in 5 years or something. And then when you look 

at the rural community, I think that is going to be a great solution 

for broadband capabilities to rural communities as well. 

Mr. STEARNS. Good point. 

Thank you, Mr. Chairman. My time is expired. 

Mr. UPTON. Mr. Inslee. 

66

Mr. INSLEE. Thank you, Mr. Chairman. 

I have enjoyed listening to your comments. I want to ask—I am 

a new member of the committee, so I am the one that needs some 

educating here. I want to ask you generally, you have been talking 

about all of these multiple regulatory issues and consistency or 

lack thereof amongst various providers of what are becoming similar bits across these channels. 

I just wonder if any of you could offer sort of a unified theory 

of regulation on these multiple issues. You know, we are facing it 

from universal service, must-carry provisions, 911 issues. We have 

all of these issues of sort of a confluence of multiple sources, not 

just Voice-over the Internet, and I just wanted to know if any of 

you, in your own minds, can think of how we should look at these 

issues of how to—where we have distinguished or unique regulation and where they should all be consistent, because we are, obviously, having this unification of multiple channels. We talked 

about, you know, video over cable, Internet, previously voice-only 

lines. Many of us think that all of this will be in one oatmeal mix 

in 10 years. I just wondered if any of you can give us some 

thoughts how you would encourage us to look at these multiple 

issues about where they need to be consistent and where they need 

to be unique to one channel or the other. It is a broad question, 

but anyone who wants to take a stab it, I would be interested. 

Ms. PUCKETT. I will try first. 

I am Karen Puckett, CenturyTel, and I don’t know if this will exactly address the comprehensiveness that you are looking for. 

But first, I think we ought to stand back and make sure that we 

put the customer first, and in all of this discussion, you know, we 

are renaming VoIP and I am guilty of using VoIP here, but at the 

end of the day, what it is about is the solution to the customer and 

the marketplace at what price point. And we all have to get our 

value propositions around that. We can do VoIP-like service today 

without IP. So the point is we have got to ensure that we put the 

customers first. We have, you know, FCC oversight as well as 

State. No one, holistically, is looking at the impact on the customer. We might have, excuse me, a State movement on a rate and 

maybe a Federal slick happen close to the same time. To the end 

user, and especially to our consumers in rural America, they only 

have so many checks in the checkbook. It is a price increase. I don’t 

care if you call it a slick or a surcharge or what, it is a price increase. So I would clearly encourage us to look at this from a customer’s perspective for a second. 

And then the third area would be around not the technology but 

the services and like services should be regulated like. And you 

know, competition is actually very good for all of us. It makes us 

stronger companies, but you have to have parity. 

And those are the three or four areas I give you as kind of principles. 

Mr. INSLEE. So when—just to dovetail what you said, what do 

you—I mean, that is an obvious great sound byte, which is like 

services should be treated like, but should we look at like services 

from like to the consumer or like to the technology or like to the 

expense to the industry? In other words, what is really the salient 

67

likeness which should have particular techniques all in the same 

regulatory——

Ms. PUCKETT. Well, I think ultimately if you go back to putting 

the customer first and keeping the forefront as from a customer’s 

perspective, I mean, today a lot of customers don’t purchase, and 

especially the younger generation, wireline services. They have 

wireless. So substitution. So we need to think more from the 

mindset of our consumers, so I would look at it from a consumer 

standpoint, sir. 

Mr. INSLEE. Any other thoughts? 

Mr. RUTLEDGE. Yeah, I think that I would agree with most of 

the—that comment. The service and the services perceived by the 

consumer I think is the most significant aspect in terms of what 

you want to do from a public policy perspective. IP is just a format 

of digital. And you know, there are other IP—there are other digital formats out there. For instance, our digital television is in a 

format called M-Peg. And one isn’t superior to the other. They are 

different technologies, and if you get hung up on the protocol as opposed to the service, I think you miss the main point, which is 

what are consumers getting, how does it—what is the service that 

they are actually being provided, and what is the public policy implication for those services? 

Mr. MELCHER. There is also the expectation of, you know, independent of the technology, it is still a communication service. So 

the expectation for things like 911 should be built in. But there is 

another piece of this that, as Federal preemption comes in more in 

the Internet telephony market, there is a significant impact. And 

this is not good, bad, or indifferent. It just is what it is. Our funds 

right now come from a local level that our State legislatures enabled us to put a fee on the phone line. And again, we are back 

to, you know, what is like. If that moves away, as more of these 

customers move from the wireline carriers to some other technology, if those technologies are overseen by the Federal Government, then we are going to have to have some mechanism there to 

recover our revenue stream or we won’t be able to provide service. 

So my recommendation is not to have it at the State level or at the 

Federal level. My recommendation is that as you look at rewriting 

these acts, you take that into account. Because if we can’t get it 

from State-authorized funding sources, we are going to have to 

have it from federally authorized funding sources. 

Mr. INSLEE. I got you. Some of you may have talked about privacy issues. I haven’t been able to hear the whole hearing, but I 

just would be interested in any thoughts you have about privacy 

issues broadly stated as we move forward to this brave new world. 

You know, we are all looking at the choice point issues right now. 

We have been involved in the spyware issue that has peripheral interest in privacy. Do you have any thoughts on what we ought to 

be thinking about privacy-wise in the immediate future? Any concerns, worries, advice? 

Mr. MELCHER. Because in the 911 arena, when you dial those 

digits you give up the right to privacy because you want to be located. However, it has to stop right there. If you make an IP telephony call and it goes to, let us say, a next generation piece app 

that is capable of doing it without going over the public switch netVerDate 0ct 09 2002 14:37 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00071 Fmt 6633 Sfmt 6602 F:\DOCS\20745.TXT HCOM1 PsN: JOEP
68

work, the consumer’s right to privacy ends right there at that piece 

app. And the fact that they called 911 and any of the data associated with it, which will be more rich data, as the technology improves, must be protected. The consumer must have their interests 

protected. 

Mr. GRIVNER. Our IP traffic today that we carry is encrypted and 

it is part of a built-in capability. It doesn’t mean it can’t be broken, 

but it is encrypted. And you know, that capability has to continue 

to be enhanced over time, because there are people spending 24 

hours a day trying to figure out how to break into it. But at a minimum, that service has to be encrypted between the callers. 

Mr. INSLEE. And is that—should that be a matter of Federal regulation to define that encryption standard? 

Mr. GRIVNER. It should be a matter of common sense, but if that 

is the way it is done, yes, I think that it should be encrypted no 

matter what. I just think it is—it would not be a—it is not a good 

decision otherwise not to send that traffic so that anybody could 

tap into it without the proper legal ability to do so. 

Mr. RUTLEDGE. I would just add, there are privacy obligations on 

different industries and different levels of responsibility. The cable 

industry has a long-standing privacy obligation, which is extended 

to each of the services that it has launched as technology has allowed us to build new products. And so there is a higher degree 

of obligation on the part of our business than others. And so I think 

there is some standardization needed in our review of the various 

components of these historic different industries. 

Mr. INSLEE. So should a VoIP carrier be able to seize the two 

people talking use the word ‘‘surfboard’’ in their conversation and 

notify a marketing based agency that these two people are talking 

about surfboards and maybe should get a pop-up ad in—somewhere 

in their other system. Should that be allowed? Should that be a 

matter of definition of the consumer or should Federal regulations 

handle that? 

Mr. ERICKSON. I think, my opinion is outside of the law enforcement requirements, how people communicate is private and should 

remain that way. And we, as Internet phone service providers, 

should not have any ability to eavesdrop or manipulate or capitalize on those conversations. 

Mr. GRIVNER. I agree. 

Mr. INSLEE. Thank you, Mr. Chairman. 

Mr. UPTON. Mr. Radanovich. 

Mr. RADANOVICH. Thank you, Mr. Chairman. 

There was a discussion about 911 not being available to some 

subscribers and some discussion about the fact that there is no 

public warning. In any telecommunications act that we do this 

year, would this panel be in favor of making it mandatory for all 

providers or for some just providing news to their customers that 

they don’t provide it? 

Mr. MELCHER. I think the public expectation is if you are buying 

a service that is telecommunication-like, that it is incumbent upon 

the carrier to provide enhanced 911, not just the ability to dial and 

redirect your call to some administrative line, but fully enhanced 

911 as they have come to believe it exists today. We have done so 

much public education during the wireless years when we were tryVerDate 0ct 09 2002 14:37 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00072 Fmt 6633 Sfmt 6602 F:\DOCS\20745.TXT HCOM1 PsN: JOEP
69

ing to solve wireless 911 that the public expectation is out there. 

We have done a good PR job. I don’t see us able to back away from 

it any time soon. 

Mr. RADANOVICH. Yeah, and I would guess that, for the sake of 

time, that is the view of pretty much the entire panel or—yeah. 

Okay. Thank you. 

Now on—still on the issue of 911, though, it was mentioned that 

for the carriers that do provide it, that there is a certain amount 

of investment in—developed into the system, which—and you 

should be compensated I think once—if it is made mandatory that 

others should have access to that information. But can you tell me, 

did you really pay for it or was—is this something that is included 

on the telephone bills, and can the argument be made that the consumers really paid for that service? Maybe Ms. Puckett or Mr. Melcher? 

Ms. PUCKETT. There are some—and I will let Mr. Melcher talk 

about the surcharges and how—but typically that is for the county 

sides to have their equipment reimbursed. There are a significant, 

what I call, back office investments. When you provision a customer, you have to ensure that that data base is—that number is 

properly put over to the data base and that data base is then communicated properly to the piece app. I think the other concern that 

needs to be focused on is, as you think about portability, as a 

wireline customer, we may have that customer today. They may 

port their number to wireless or to a VoIP provider. We can’t track 

it then. I think the whole portability issue is a big concern with 

911. 

Mr. MELCHER. There are some built-in and institutionalized 

things that you do when you become a service provider. And in the 

competitive open exchange carrier model, you had to plug in three 

places. You had to plug in to the local access tandem, which was 

usually run by the incumbent carrier. You had to plug into an 

interexchange carrier tandem for long distance service, or several 

interexchange carrier tandems, and you had to plug into the 911 

tandem. But the only one that you got any money back for was 

plugging into the 911 tandem because of the model we built with 

the incumbent exchange carrier who runs the 911 system that they 

got paid for those circuits. 

I think there are some fundamental flaws, new technologies come 

in that model. Perhaps the cost of doing business says I do connect 

to whatever it is, IP or whatever. I do connect to the 911 routing 

system, and I do upload my records. Now should I be compensated 

for maintenance of the records and the accuracy and all of those? 

I think that is a very good argument. But I might fire SBC from 

my selective routing function and hire Mr. Grivner’s company to 

come in and do some IP-based routing function and then that way 

Ms. Puckett and Mr. Rutledge and everybody else is going to trunk 

to or somehow connect to my new routing infrastructure that is capable of next generation IP and everything else, but it is going to 

be away from that incumbent model that we are so chained by 

today. 

Mr. RADANOVICH. All right. Thank you. 

70

One last question on the issue of universal coverage. Is it really 

more just an issue of shared cost that the argument is or is it more 

the issue of shared regulatory burden for this? 

Ms. PUCKETT. Everyone on this panel benefits from universal 

service, because either legacy communication products and services 

or the IP still requires the underlying telecommunications infrastructure. And we all have to connect be it to VoIP providers, cable 

providers, we all don’t have private networks. We use the public 

network, and that is very much about what USF is about to ensure 

that there is that interconnection in those networks in and out of 

rural America to these public networks. 

Mr. RADANOVICH. Um-hum. Still I—you know, and you have to 

understand, this chart that you brought to clarify everything didn’t 

clarify anything for me, so you know where I am coming from. 

Ms. PUCKETT. Okay. 

Mr. RADANOVICH. But I—but the issue is, as—the way I see it, 

and most of what I have heard on universal coverage, is that everybody who provides telecommunication services should be provided 

to make sure that these services are provided to everybody——

Ms. PUCKETT. Correct. 

Mr. RADANOVICH. [continuing] and I represent a very rural District in California, so, you know, I fully endorse the concept. How 

much of this is regulatory, though, and how much of it is money, 

the issue of universal coverage? Am I speaking English here or——

Ms. PUCKETT. It is about having the capability in rural America, 

in my opinion, so it is about consumers having access——

Mr. RADANOVICH. Right. 

Ms. PUCKETT. [continuing] to communication services. 

Mr. RADANOVICH. Right. But is this more a—is it more an issue 

of having those people that are not paying for universal coverage 

and providing service now start paying in or is there a regulatory 

component to this that I don’t——

Ms. PUCKETT. Well, they benefit. For those who aren’t paying in, 

they still benefit today because of the public network. There are 

tradeoffs. 

Mr. RADANOVICH. I am just asking you, as—in business, are you 

more worried about making sure that everybody pays their fair 

share for telecommunication service or are there additional regulatory issues that come along with making sure that everybody has 

universal care? 

Mr. GRIVNER. Everybody pays their fair share. That is the issue. 

Mr. RADANOVICH. That is the main issue? It is money rather 

than——

Mr. GRIVNER. Well, everybody pays their fair share. 

Mr. RADANOVICH. [continuing] regulatory? 

Mr. GRIVNER. No one—I mean, there are probably questions 

about how the fund is used, but the first step is everybody pays 

their fair share. 

Mr. RADANOVICH. Okay. Great. That is——

Mr. MELCHER. That allows us to take these new technologies and 

get them into areas that didn’t exist before. 

Ms. PUCKETT. And at the end of the day, it is about the consumer. 

71

Mr. RADANOVICH. No, I agree with you 100 percent. I am just 

trying to figure out whether your concerns are the fair share component of this thing as far as money goes or spreading the regulatory burden as well. Maybe I—it is also a regulatory burden component to that——

Ms. PUCKETT. Well, there is certainly a regulatory burden, but 

I would still say the fundamental issue here is the consumer. 

Mr. RADANOVICH. Is the consumer? 

Ms. PUCKETT. Yes. 

Mr. RADANOVICH. But it is—for you, it is for the fair share of the 

dollar contribution to the universal——

Ms. PUCKETT. The consumer. 

Mr. RADANOVICH. Well, I know that, but I am trying to get your 

perspective on this. 

Thank you very much. 

Ms. PUCKETT. Thank you. 

Mr. UPTON. Mr. Pickering. 

Mr. PICKERING. Thank you, Mr. Chairman. 

One of the things that I wanted to talk about, as we look at the 

current environment with the mergers with SBC and Verizon, an 

enterprise market in which Mr. Grivner and Mr. Erickson are trying to compete, you could have a situation if access to the network 

is not maintained for the bottleneck facilities, then that additional 

competitive option or choice could be lost and it could result in 

going back to a duopoly at best with enterprise, possibly a duopoly 

and residential voice between cable and the Bell companies. And I 

think that history has shown us that whenever we have a monopoly or a duopoly you do not have the investment or the innovation 

or the choice or the competition. 

So it is very critical at this juncture that as we do IP reform and 

telecom reform that we make sure that, just as Mr. Boucher was 

talking about access to content, which creates the greatest amount 

of competitive choice for individuals, that we also maintain access 

to networks so that we have the greatest amount of competitive 

choice and the greatest investment and the greatest innovation. 

Mr. Erickson, Mr. Grivner, have you all looked at Mr. Boucher’s 

and Mr. Stearn’s bill? Is it—as I interpret it, it would effectively 

remove all access to the Bell network for CLECs. Is that how you 

would interpret it? And what would the result be if that language 

were adopted? 

Mr. GRIVNER. Well, the result would not be good, because no 

matter whether we provide IP services and all of the switching and 

everything else, as you well know, that last mile connectivity is and 

still will remain a bottleneck. That is, I think, one of the appeals 

of your bill is that—I think it addresses the heart of the issue. You 

are looking for people to invest, facilities-based carriers to invest. 

That could only go to a certain point, and that last point is that 

last mile of connectivity. And I think that is an important part of 

this discussion that is not going to change. You aren’t going to see 

a lot of investments where people are going to be digging up the 

streets and putting in new fiber into buildings. That is just not 

going to happen. So I think that is an important discussion that 

needs to occur. 

72

Mr. PICKERING. Would you say if you don’t have access to a bottleneck facility you—access to content is moot? 

Mr. GRIVNER. It is. You are absolutely 100 percent correct. And 

I also agree with your other points relative to innovation, competitive pricing, and the things that have been achieved over the last 

8 years we don’t want to see lost as a result of what has occurred 

over the last couple of months. 

Mr. PICKERING. Mr. Rutledge, from cable’s perspective, how do 

you—access to networks, interconnection and interoperability? 

Mr. RUTLEDGE. Well, we certainly are very interested in being 

able to interconnect with the public switch network and think that 

we need to be able to continue to do that. We are right now doing 

it through a CLEC process, which is the existing regulatory structure. And we think there may be, you know, an obligation—or an 

opportunity to create rights for VoIP providers that might accomplish the same thing. 

We are concerned about these mergers in suppliers, people that 

we buy services from, long distance services, for instance, for our 

customers going away. But one other comment about—in the enterprise area, we have launched our broadband services and our 

Voice-over IP services primarily to residential customers, but we 

are ready now to expand into the enterprise area in a rapid way, 

and technology has come along in such a way that I think we will 

be able to provide very low-cost communication services to businesses in ways that they have never experienced from a price position. 

But I don’t think it is just a duopoly. There are wireless providers, and multiple wireless providers, in most markets. So when 

I look at the facilities-based competitive landscape, it is a very competitive arena, not just physical wireline competitors, but multiple 

wireless competitors, and new wireless entrants coming. 

Mr. PICKERING. But in the enterprise market, you would say 

today, cable is not an enterprise market, wireless is not an enterprise market. You have some CLECs in the enterprise market——

Mr. RUTLEDGE. Yes. 

Mr. PICKERING. [continuing] and so to be able to—an enterprise 

market not to go to a duopoly, you would need to maintain some 

access to bottleneck facilities, under the—and again, over time we 

can transition away from that, under the impairment standard. 

But today, we—if we have bottleneck facilities, a continuation of 

access to those networks is critical to have a—not a duopoly but 

multiple choices. 

Mr. RUTLEDGE. Well, I am, when I try to reach a business customer, I am building a facility to their place. 

Mr. PICKERING. But you have not done so yet? 

Mr. RUTLEDGE. Well, I have, yes. And we have a CLEC business, 

and we have 40,000 or so business-class customers on our data network, which most people think of it as a traditional cable system. 

And I think that there is a huge opportunity to expand that now 

that we have a Voice-over IP product to go with the data product. 

So the facilities are there, but designing products that can reach 

the business marketplace has been, you know, heretofore, not really accomplished, but I think we are on the verge of having a rich 

array of products for the business class market because of VoIP 

73

technology. And again, that is cost structure. And so I think you 

are going to see a lot more competition, facilities-based competition 

almost immediately in that area. 

Mr. PICKERING. Ms. Puckett. 

Ms. PUCKETT. I would just add one thing. We have just purchased—we are in the process of closing on a part of KMC, which 

is a CLEC that we are—a lot of metro access rings outside of our 

franchise but near our franchise. And my point being is that knowing the ruling was going to change and such, we still move forward, 

because it is very much like facility-based. So we will go in and 

provide facilities. We don’t think about reselling necessarily. That 

is not our model. So I think that is an important way to look at 

that, too. 

Mr. PICKERING. Would any—under your model, your business 

plan, would you still need access to any of the Bell networks? 

Ms. PUCKETT. The company that we are purchasing 16 of these 

markets have some access, and that is important, but basically, we 

are going to go ahead and build facilities to those buildings and 

transition the ones off that aren’t profitable over time. So we—our 

business model is very much about a facility-based——

Mr. PICKERING. Thank you very much. 

Mr. UPTON. Thank you, Mr. Pickering. 

I want to say just in conclusion of the hearing, we appreciate all 

of your testimony, that is for sure. And it was nice, Mr. Melcher, 

for you to bring Reverend and Mrs. John with us. I have to say, 

as I look at the good history of this committee, the legislation that 

we have enacted into law, it is often those personal examples that 

drive each and every one of us. One of the highlights in the last 

session was the enactment of the E-911 legislation. As we held the 

hearings and went through the markup stage, members on both 

sides of the aisle recanted their calls that we have all made to 911, 

trying to help someone, not necessarily someone in our own family 

but some accident on the road that we have seen as we travel 

many tens of thousands of miles each year in our Districts and in 

our States. And that—those experiences drove every member to 

pass that legislation, I think on a unanimous basis, but maybe we 

have got a certain member from Texas who likes to vote no. Maybe 

he didn’t vote for it, not a member of this committee. 

But in any case, it happened. And when we had our earlier hearing related to this issue, the updating of the Telecom Act of 1996, 

I think it was Mr. Shimkus who raised the case of Reverend and 

Mrs. John. I have not seen the story until he talked about it. It was 

later on in USA Today and as we update the telecom laws, whether 

it is making sure that there is a link to 911, obviously universal 

service, which this committee focused a lot of attention on today, 

all of those different things relate to our Districts and where members are, and it is one of the reasons why, for the most part, almost 

without exception, we have been able to pass legislation out of this 

subcommittee and full committee, no matter who has held the 

gavel, on a bipartisan basis. 

And we appreciate your thoughtful testimony, and it will certainly be taken into account as we begin the big process, the heavy 

lifting in a few months of actually putting a bill together as we look 

74

at this. And maybe VoIP will be a term of old and BITS will be 

the term of the future. 

God bless all of you. Thank you again for your testimony. The 

hearing is now adjourned. 

[Whereupon, at 1:47 p.m., the subcommittee was adjourned.] 

[Additional material submitted for the record follows:]

RESPONSE FOR THE RECORD BY THOMAS M. RUTLEDGE, CHIEF OPERATING OFFICER

OF CABLEVISION SYSTEMS CORP. 

FOLLOW-UP QUESTIONS FROM THE HONORABLE FRED UPTON

Question: Do you believe that the pool of contributors to universal service should 

not be expanded to include broadband and IP providers? 

Response: Cablevision supports the goal of universal service. Cablevision contributes to the universal service fund through its its certified LEC, Lightpath, that provides telecommunications services to its VoIP service, Optimum Voice. Cablevision 

supports the FCC’s continued efforts to review and rationalize the existing federal 

universal service system. Before a specific funding mechanism is adopted, key questions regarding the services to be funded and the pool of contributors must be addressed to ensure equity among competing carriers on a level playing field. 

Question: Do you believe that VoIP providers should not have a right to interconnect with local exchange carriers? Does your view change if the interconnection 

is indirect/virtual rather than direct? 

Response: Cablevision currently does not need the right to directly interconnect 

with ILECs due to its existing relationships with competitive local exchange carriers, which have interconnection agreements with ILECs. 

Question: Do you believe that VoIP providers are legally entitled not to have their 

services disrupted? 

Response: Cablevision does not believe any new legal requirements are necessary 

to ensure that broadband customers have access to VoIP services. 

Question: How should Congress ensure that broadband providers do not disrupt 

IP services offered over their networks? Should Congress legislate the so-called Net 

Freedoms or Net Neutrality Principles? 

Response: Cablevision’s Optimum Online broadband service does not block or 

hinder its subscribers from accessing any content or service they choose or affect 

the quality of service offered by third party applications like Vonage. The marketplace will ensure that broadband subscribers receive access to the services they 

want. Government-mandated access is unnecessary and counterproductive to 

broadband investment and deployment. Impeding broadband subscribers’’ access 

and diminishing their enjoyment of their broadband service would be bad business, 

and any legislation that attempted to ‘‘address’’ this matter would be speculative 

and could have adverse consequences on both broadband providers and application 

providers. 

Question: Do you disagree that number portability should be available for VoIP 

customers? 

Response: VoIP providers should have the right to offer porting to their voice customers. 

Question: As a matter of policy, do you believe that ILECs should not be required 

to provide 911 network components to VoIP providers? 

Response: Access to the current 911 systems is dependent upon cooperation by the 

ILECs. Until there are real alternatives means to access 911 in a way that affords 

high reliability to all providers, VoIP service providers should be able to get the necessary 911 network components through the ILECs and have the ability to provide 

911 services to their subscribers. 

Question: Do you disagree that Congress should mandate that VoIP customers 

provide E911 services? 

Response: Cablevision provides E911 services to its VoIP service subscribers because we believe that it is valuable to our customers. We also believe that customers 

expect a reliable 911 service as a part of basic voice services. VoIP customers must 

have ready access to E911 and emergency services. 

FOLLOW-UP QUESTIONS FROM THE HONORABLE BARBARA CUBIN

Question: Do you support a number or number-equivalent contribution model for 

a modernized Universal Service Fund? 

Response: Cablevision supports the goal of universal service, and its VoIP service 

contributes to universal service through its relationships with local exchange carVerDate 0ct 09 2002 14:37 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00078 Fmt 6633 Sfmt 6621 F:\DOCS\20745.TXT HCOM1 PsN: JOEP
75

riers that provide telecommunications services as part of the VoIP offering. Before 

a specific funding mechanism is adopted, the universal service system must be 

rationalized so that providers, particularly those who invest in facilities, are not disadvantaged in the marketplace because of the additional costs that must be recovered from customers. 

Question: The nature of IP voice seems to make it inherently difficult to track 

these packets and where they terminate. Is it really possible to tag them? If so, will 

that allow for an ‘‘electronic paper trail’’ for inter-carrier compensation? 

Response: Cablevision agrees with the FCC that it is virtually impossible to determine the jurisdictional nature of IP voice traffic. For this reason, Cablevision supports the FCC’s intention to modernize the existing intercarrier compensation regimes to take into account the variety of voice services available in the market today 

and to migrate toward a more equitable, less administratively burdensome model 

that approximates today’s peering and bill and keep arrangements. 

FOLLOW-UP QUESTIONS FROM THE HONORABLE BART GORDON

Question: Would it help to guarantee that IP enabled telephony services have the 

same access to 911 facilities and databases as telecommunication service providers, 

and should this be done at the state or federal level? 

Response: Cablevision currently does not need access to 911 facilities and databases for its Optimum Voice service due to its existing relationships with underlying 

telecommunications carriers that support this service directly. Cablevision, however, 

is supportive of a creative regulatory approach that supports the continued rollout 

of VoIP services and e911 availability. Where technical issues need to be addressed, 

Cablevision supports voluntary industry action over government regulation. 

Question: What 911 services are you currently providing with your VoIP services? 

How are you interconnecting with the 911 systems and have your company experienced any access problems? 

Response: Cablevision provides E911 services to its VoIP service subscribers. To 

do so, Cablevision partners with competitive local exchange carriers to obtain the 

necessary inputs for the services it offers, which include direct E911 trunking. Optimum Voice has had no difficulties with those trunking or access facilities. 

FOLLOW-UP QUESTIONS FROM THE HONORABLE ELIOT ENGEL

Question: Again, I want to commend Cablevision’s efforts to comply with 911. I 

understand Lightpath, your CLEC, also pays into the Universal Service Fund—I applaud that as well. I support Universal Service and the ERate program. However, 

it is funded by a fee based on inter-state traffic. Yet, I understand that if a Cablevision customer using VoIP in NY calls a Cablevision customer in Massachusetts, 

then your network does not register that as an ‘‘interstate call.’’ I say this to point 

out that the basic measure by which we fund USF is disappearing. Thus, we must 

find a new way—and so I would like to explore what this new way could be. I know 

this is complicated and it is hard, but we should have an open discussion about this. 

Do you have a proposal on how future payments into USF should be made or assessed? 

Response: Cablevision supports the FCC’s continued efforts to review and rationalize the existing federal universal service system. Before a specific funding mechanism is adopted, key questions regarding the services to be funded and the pool of 

contributors must be addressed to ensure equity among competing carriers on a 

level playing field.

Æ