[CIX logo] WHITE PAPER: A TELECOMMUNICATIONS POLICY FRAMEWORK FOR INTERNET SERVICE PROVIDERS MARCH 1995 _________________________________________________________________ Forward This White paper proposes a telecommunications policy framework for Internet Service Providers (ISPs) that facilitates achievement of National Information Infrastructure (NII) objectives consistent with the emerging national telecommunications policy of open and fall competition, open/equal access, equal opportunity (not equal outcome), preservation of universal service, minimal government regulation, no new entitlements, no protectionism, and competitive neutrality. While it is vital to the nation's economy to have facilities-based carrier competition, it is equally vital to have an identical environment at the Enhanced Service Provider (ESP) level to assure consumers affordable and responsive enhanced services including Internet access. The Internet Service providers who are members of the Commercial Internet eXchange Association (CIX) are already providing key NII services and are prepared to accommodate customer demands for increasing connectivity ubiquity and capacity. As the trade association representing the preponderance of American ISPs, CIX is prepared to work with legislators and regulators to facilitate achievement of a telecommunications policy framework that will bring the benefits of information services to all our citizens. Robert D. Collet Chairman of the Board and President Commercial Internet eXchange Association 1035 Sterling Road Suite 201 Herndon, VA 22071 _________________________________________________________________ TABLE OF CONTENTS * I. EXECUTIVE SUMMARY * II. INTRODUCTION * II. THE INTERNET: TODAY AND TOMORROW * III. TEN PRINCIPLES FOR INTERNET COMPETITION * IV. DISCUSSION 1. Comparably Efficient Interconnection for All ISPs 2. Unbundling of BOC Network Elements 3. The Need for CEI on the Video Dialtone 4. USF Payments and the Internet 5. Exempting ESPs From State USF Funding 6. ISP Exclusion from Access Charges 7. CEI Requirements For Alternative Local Carriers 8. Content Monitoring and the Internet 9. Subscriber Line Charges for Physical Channels Only 10. Management of Internet Address and Name Space * V. OTHER AREAS OF CONCERN * CONCLUSION * GLOSSARY * DESCRIPTION OF SIGNIFICANT REGULATORY TERMS _________________________________________________________________ EXECUTIVE SUMMARY Telecommunications legislation and regulation should assure a level playing field between facilities-based ISPs and those that are ESPs. Key principles to be considered in developing such legislation and regulations include: 1. Facilities-based carriers should provide access arrangements to ISPs equal to that afforded the carrier's own Internet service offerings; 2. Incumbent LECs should not be allowed to use USF payments to subsidize their own ISP offerings; 3. ISP services are "enhanced service" and should not be assessed carrier access charges; 4. ISPs should not be required to monitor traffic content; 5. Subscriber Line Charges should be assessed for physical channels, not virtual channels. 6. Telecommunications legislation and regulations should address the management of Internet address and name space. Attached to this White Paper is a glossary defining many of the terms used throughout this document. Unless specifically defined within the text of this White Paper, all terms are defined in the attached glossary. _________________________________________________________________ I. INTRODUCTION CIX presently consists of 90 domestic and 32 foreign ISPs. The goals of CIX are to facilitate global connectivity among ISPs throughout the world, to encourage commercial uses of the Internet, to foster fair and open environments for Internet commercialization, and to provide a forum for the exchange and development of ideas to enhance the vitality of the ISP industry. The objective of CIX's legislative and regulatory guidelines is to assure a fair and open competitive environment for both carrier-based and ESP-based ISPs. Fair and open ISP competition, in turn, will maximize the choices available to the public. _________________________________________________________________ II. THE INTERNET: TODAY AND TOMORROW The Internet is a virtual communications infrastructure using the communication capabilities of telecommunication services throughout the world. These telecommunication services include both regulated and unregulated services, including among others, switched voice, private line, X.25, Frame Relay, ISDN, and CATV. The utility of the Internet lies in its ability to deliver information on an end-to-end basis across multiple networks. In some respects, the Internet is analogous to the telephone network where cooperating telephone companies complete calls on an end-to-end basis. However, it is different from the telephone network because there are no settlements among ISPs, market entry is relatively, easy and multiple ISPs can service the same area. Today, Internet services consist of remote host log-in, electronic mail, file transfer and information discovery services, e.g., Gopher (indexed file transfer) and the ever popular Worldwide Web. In the near future Internet services will likely include telephony, video conferencing, video distribution, and broadcasting with provisions for security and mobility. The Internet community continues to enhance technology to provide key elements of the NII. Currently, ESPs provide most of the Internet access services, with only a handful of LECs and IXCs offering similar services. It is anticipated, however, that all LECs will eventually enter the ISP business, given the vast commercial potential of the Internet. Non facilities-based ISPs are heavily dependent upon carrier telecommunications basic transport services. This paper proposes telecommunications policy that safeguards choices and competition for consumers of the Internet by assuring a competitive ISP market. _________________________________________________________________ III. TEN PRINCIPLES FOR INTERNET COMPETITION CIX offers ten policy principles to promote and enhance competition among ISPs: 1. BOC Internet-applicable, separate or integrated data transport services should be offered within the framework of the CEI regime. 2. BOC ONA plans should provide CEI provisions for Internet services. 3. VDT services should also provide specific CEI requirements for Internet Services. 4. All "other" local common carriers, (e.g., CATV, PCS, and cellular) should provide CEI access and ONA for Internet services. 5. Enhanced Services, regardless of whether LEC-provided or ESP-provided, should not be eligible for USF high cost assistance. 6. ISPs should not have to contribute to the USF. 7. ISPs, as ESPs, should continue to be recognized as "end users" and should not be subject to LEC "carriers' carrier" access charges. 8. ISPs should not be required to monitor traffic for illegal content. 9. SLCs should be levied only on physical channels, not logical channels, e.g., ISDN, Frame Relay PVC/SVCs, ATM VPs/SVCs. 10. The FCC should develop policy for "logical" industry requirements including management of Internet address and name space, to assure the equitable allocation of resources for large and small service providers. _________________________________________________________________ IV. DISCUSSION The following subsections fully describe each of the above principles. 1. Comparably Efficient Interconnection for All ISPs CIX believes that the BOCs Internet-applicable, separate or integrated data transport services should be offered within the framework of the FCC's CEI regime. Background The BOCs have deployed many data transport technologies used by ISPs, including, switched voice, SMDS, Frame Relay and ISDN. New transport services are anticipated, such as ATM and virtual LAN services. Today, customers of both the carrier-based ISPs and ESP ISPs have equal access to carrier facilities. However, as customers demand virtually instantaneous Internet access, the facilities based carrier will easily fashion an access mechanism for its own Internet service customers that is faster than the access mechanism offered to ESP customers. Such a competitive advantage will overwhelm independent ESPs providing Internet services. This competitive imbalance will be felt by the public at large because ESPs/ISPs provide a wide variety of services that a facilities-based oligopoly, (e.g., LEC and CATV) may be unresponsive to. The following are two examples of how integrated carrier ISP services provide the BOC an overwhelming competitive advantage over ESP ISPs: Example 1: Integrated Signaling By integrating carrier signaling with ISP services, a BOC can provide the customer a nearly instantaneous Internet connection. As soon as the user desires access. e.g., "clicking" an icon on a PC or a TV, the signaling system of the carrier's bearer network can instantaneously allocate a channel or circuit from the user to the carrier's Internet access facilities. This advantage could be neutralized by requiring a BOC to provide signaling services to ISPs on an equal basis to that of its own Internet access service offering. Example 2: LAN-like Bearer Network The BOCs today offer either dedicated or circuit/packet switched access services, and as described in Example 1 they can support equal access. The LAN-like technology is very attractive because of its ability to deliver inexpensively high bandwidth (ethernet: 10 mbps, FDDI: 100 mbps). However, the emerging LAN-like bearer network services are not amenable to equal access, e.g., ethernet or FDDI, because sharing these media among ISPs is not feasible, due to their inability to scale to large numbers of attachments. Consequently, to meet CEI requirements, a BOC would need to implement the LAN-like bearer service as a virtual service over switched facilities (e.g., SMDS). Recommended Policy Provide equal access to BOC Internet-applicable data transport offerings for all ISPs. The Commission's retreat from Computer III BOC structural separation requirements necessitates strong CEI requirements to assure equal access to transport network features. 2. Unbundling Of BOC Network Elements CIX believes that, the FCC should not rely solely on CEI requirements, but should require the unbundling of BOC network elements. Background FCC Computer Inquiry III concluded that, in the long term and with the implementation of ONA, the BOCs should be permitted to provide integrated enhanced services without prior Commission approval of service-specific CEI plans. The Commission ordered the BOCs to develop ONA plans under which the BOCs would unbundle elements of their networks and offer them to competing ESPs on a non-discriminatory basis. In the Computer III Phase I order, the Commission stated that once those ONA plans were approved, it would fully lift the Computer II structural separation requirements. In 1990, the Ninth Circuit vacated and remanded three of the Commission's Computer III orders because the FCC had not demonstrated sufficiently that its nonstructural guidelines adequately protected against improper cross-subsidization of enhanced services by the BOCs. At that time, the FCC issued an interim waiver permitting the BOCs to continue offering enhanced services on an integrated basis pursuant to their approved CEI plans. In addition, the FCC reimposed ONA requirements on the BOCs independent of removing structural separation requirements. In 1991, the FCC adopted the BOC Safeguards Order, which strengthened the safeguards criticized by the court in California I, and decided to lift Computer II structural separation requirements fully once BOC ONA plans were approved and implemented. In a series of orders between 1988 and the end of 1992, the Commission approved BOC ONA plans that described the unbundled basic services each BOC proposed to provide as ONA services and the terms under which they would be offered. During 1992-1993, the Common Carrier Bureau approved the lifting of structural separation requirements for individual BOCs upon demonstrating that all of the ONA services in their initial ONA plans had been implemented. In 1993, the Ninth Circuit decided California II, which upheld the orders approving BOC ONA plans. The California II court concluded that the Commission has scaled back its vision of ONA since Computer III, but that the issue of whether the lifting of structural separation was still justified was not properly before it. In California III, the Ninth Circuit preserved much of the BOC Safeguards Order. The Ninth Circuit upheld the Commission's findings that a regime on nonstructural safeguards adequately prevented improper cross-subsidization of enhanced services by the BOCs. The court also upheld the preemption elements of the BOC Safeguards Order. Moreover, the court noted that California I had determined that the Commission had justified, in Computer III, the use of nonstructural safeguards, such as ONA, to prevent the BOCs from providing ESPs with inferior access to basic network services. The court acknowledged that, as an interim measure until ONA was implemented, CEI plans "ensured that enhanced services competitors were provided with interconnections with the BOC's own networks that were substantially equivalent to the interconnections that BOCs provided their own enhanced services." Nevertheless, the court remanded that part of the BOC Safeguards Order lifting all structural separation requirements. The court found that the Commission had not adequately explained the decision to lift these requirements when the BOCs' approved ONA plans did not provide for fundamental unbundling of the BOC networks. According to the court, the Commission had found, in the original Computer III Phase I Order, that fundamental unbundling was necessary to protect against access discrimination in the absence of general structural separation requirements. Under the Commission's interim CEI regime, "the BOCs could provide integrated enhanced services pending the unbundling of the networks" pursuant to individually approved CEI plans that ensured that the interconnections given BOCs and their competitors were "substantially equivalent." In contrast, ONA was supposed to give competing ESPs the ability to "pick and choose" network service elements not used by the BOCs in providing their own enhanced services. In the absence of an explanation from the Commission why it no longer regarded such fundamental unbundling as necessary to prevent access discrimination, the court found the Commission's overall cost benefit analysis flawed, and the decision to lift structural separation arbitrary and capricious under the Administrative Procedure Act. Recommended Policy The Commission should reemphasize the ONA regime to provide ESPs, including ISP ESPs, the ability to select BOC service features applicable to their unique needs, and any legislation enacted should embody this same emphasis. While CEI is a worthy first step towards lifting BOC structural separation, there are elements of the BOC network that could be unbundled, e.g., signaling as described in 1 above, to allow the ESP ISP industry to fashion ISP services that are responsive to niche customer requirements that a BOC may have no interest in serving. 3. The Need for CEI on the Video Dialtone CIX believes that BOC provided VDT-enhanced services should be subject to CEI and ONA requirements. Background The BOCs have collectively requested an interim waiver of Computer II rules so they can continue to provide existing and new customers with enhanced services offered pursuant to previously-approved CEI and ONA plans. The BOCs are also seeking permission to continue unseparated planning and development of enhanced services, including technology tests and market trials, in addition to offering new enhanced services associated with VDT on an integrated basis without obtaining prior FCC authorization. The FCC's January 11, 1995 Common Carrier Bureau Memorandum and Order explicitly denies the waiver request for VDT CEI exemption. As well as proposing VDT, the VDT applications approved by the FCC have also proposed enhanced services such as interactive training and education, interactive shopping, information on demand and electronic publishing. However, none of the applications or approvals discusses the nature of the mechanism for providing access to enhanced services. For example, a BOC could elect to offer enhanced services or programming access command and control over a data communications mechanism that could also provide Internet access services. In particular, under the FCC's rules, the VDT service must provide a means by which end-user subscribers can access any and all of the video programming offered. Recommended Policy While integration of voice, data, video and enhanced services makes optimum use of bearer transport services, the elements of the VDT infrastructure should be unbundled and offered both an ONA and CEI regime. Applying the same unbundling and interconnect policies to VDT services as those applied to telephony will enable ESPs to serve niche markets and compete on a level playing field with BOC ESP services. These policies will also encourage the BOCs to select a VDT data transport technology that supports multiple concurrent use and deterministic service levels, e.g., SMDS. With such a bearer service, the BOCs will be able to support the needs of their own ESP products as well as that of competitive ESPs. 4. USF Payments and the Intersect CIX believes that USF payments, which are designed to compensate a LEC for providing basic services in high cost areas, should not be used to subsidize the LECs' entry into the ISP business, because the logical components of Internet access services can be provided remotely via any ISP. Of course, the transport component provided by the LEC is eligible for high cost assistance. Background Internet access services require both physical and logical infrastructures. Circuit switching is required at the physical (i.e., carrier) level . Depending upon the LEC's facilities, switched circuits (analog and ISDN) can deliver up to 128 kbps of data. At the logical level, routers and various functional servers are required to provide the customer full access to the global Internet. Because the Internet-applicable components are logical, there are no geographic co-location requirements, and so, the ISP router-based infrastructure can be hundreds of miles away from the customer. Therefore, there is no need for the LEC, serving a high cost area, to have its Internet access service subsidized in any way by the USF. Of course, the LEC can receive a subsidy for providing carrier services, i.e., circuit-level, to high cost customers. Currently, there exists a Federal USF and several state USFs. The USF is funded by IXCs under FCC regulation. The purpose of the USF is to provide, at reasonable cost, access to all citizens of "basic" telecommunications services, e.g., dial tone, 911 access, and directory access. The definition of "basic" has continuously evolved. Several state Public Utility Commissions (PUCs) are considering the addition of Internet access within the definition "basic" services. Presently, ISPs who are not incumbent LECs do not have an opportunity to receive high cost assistance from either Federal or State USFs. The FCC has invited comment on various policy questions relating to the provision of high-cost assistance, e.g., cost allocations, fund size, funding mechanisms, and study area sizes/ qualifications. The FCC also asked whether high-cost assistance should be targeted to support basic services without providing assistance for more advanced service offerings. Current USF rules provide the incumbent LEC a competitive advantage over non incumbent LECs. An alternative and more equitable approach would disburse USF finds to telecommunications users who need high-cost assistance via a voucher or credit system. The existing high-cost assistance mechanisms may impede full and fair competition by giving incumbent LECs financial support denied their competitors. Recommended Policy a. Keep Enhanced Services like ISP services outside the framework of the USF, i.e., no subsidization of the LECs ISP offerings. b. A voucher or credit system should replace the current arrangement so that non incumbent LECs can compete for local switched services (with the expected result of lower prices). 5. Exempting ESPs From State USF Funding CIX opposes the proposal of several states to tax both basic and enhanced communication services for the purpose of funding their state USFs. Background The FCC has previously stated that high-cost assistance must serve the goals underlying the principle of universal service. High-cost assistance can play a role in preserving and enhancing universal telecommunication services at fair and reasonable rates. The Commission has specified three primary characteristics for an efficient high-cost assistance system: 1. Assistance should be tailored so that only those users or service providers who need assistance to ensure universal service receive such support. 2. Optimal high-cost assistance mechanisms should promote efficient investment and operation. 3. The best high-cost assistance mechanism would not impose excessive subsidy costs upon interstate carriers and rate payers. Some states, e.g., Vermont, are evaluating whether to provide high-cost assistance and low income subsidies for "information highway" access, i.e., Internet access, and associated funding mechanisms for their USFs. It is unclear at this time exactly who would fund the USF. It is conceivable that states could impose Internet access subsidy costs on Internet service providers as well as IXCs. Recommended Policy ISPs services should be exempted from USF oriented funding charges, because no additional funding is required to support customers in "high-cost" areas as the services provided are logical and utilize the same carrier facilities as switched voice services. 6. ISP Exclusion from Access Charges ISPs and other ESPs are currently recognized as "end users" and are not subject to LEC "carriers' carrier" access charges. CIX believes this distinction should be preserved. Background ESPs such as Tymenet, CompuServe and SprintNet, and ISPs have paid LECs end user rates for switched access in contrast to IXCs, who pay for switched access on a per minute basis. The difference between business line rates is of great magnitude. ESPs have enjoyed this status because of the public policy need to foster an on-line nation. Recommended Policy Differential switched access rates for IXCs and ESPs should be maintained, because LEC facilities are optimized for voice and not for data communication services. ESPs should not be required to pay carrier access charges (if they continue to use switched voice access services) until the LEC provides optimized local data communication services, e.g., SMDS to all residential and nonresidential subscribers. 7. CEI And ONA Requirements For Alternative Local Carrier CIX believes that AAVs providing enhanced services should be subject to CEI and ONA requirements. Background Over the last several years, AAVs, like Teleport, Metropolitan Fiber Systems (MFS), Cox Cable, and TCI have deployed common carrier-like infrastructures that offer alternative local access. The wireless industry, including the Cellular and emerging PCS services, will offer yet another alternative to the LEC. They offer both dedicated and switched access services. Today only the BOC and GTE operating companies (under consent decrees) must offer CEI services and unbundled services within the framework of an ONA. OCCs such as non-BOC or GTE LECs are not required to operate under CEI or ONA. The AAV and OCC exemption from CEI and ONA can yield the AAV's and OCC's Internet Access products a substantial competitive advantage over ESP-based ISPs. Such an advantage can be obtained by integrating their Internet Access products with their data transport services, e.g., signaling or LAN-bearer. If OCCs and AAVs were required to offer service under CEI and ONA the ESP-based ISP could compete on a level playing field and accordingly assure consumers market choice. Recommended Policy If AAVs and OCCs provide enhanced services, they should be required to provide CEI and ONA access. 8. Content Monitoring and the Internet The current Exon Amendment prohibits use of telecommunications facilities for transmittal of offensive or obscene information. CIX believes that such a requirement could cripple the ESP industry. Background The Exon Amendment (S.314) would compel service providers to choose between severely restricting the activities of their subscribers or completely shutting down their e-mail, Internet access, and conferencing services under threat of criminal liability. Moreover, service providers would be forced to closely monitor every private communication, electronic mail message, public forum, mailing list, and file archive carried by or available on their respective networks, a proposition that poses a substantial threat to the freedom of speech and privacy rights of all American citizens. S.314 would make telecommunication carriers (including telephone companies, commercial on-line services, ISPs, and BBS's) strictly liable for every message, file, or other content carried on their networks -- including the private conversations or messages exchanged between two consenting individuals. Under S. 314, anyone who "makes, transmits, or otherwise makes available any comment, request, suggestion, proposal, image, or other communication" which is "obscene, lewd, lascivious, filthy, or indecent" using a "telecommunications device" would be subject to a fine of $100,000 or two years in prison (Section (2)(a)). In order to avoid liability under this provision, service providers would be forced to pre-screen all messages, files, or other content before transmitting it to the intended recipient. Carriers would also be forced to prevent or severely restrict their subscribers from communicating with individuals and accessing content available on other networks. However, electronic communications networks do not contain discrete boundaries. Instead, users of one service can easily communicate with and access content available on other networks. Placing the onus, and criminal liability, on the carrier as opposed to the originator of the content, would make the carrier legally responsible not only for the conduct of its own subscribers, but also for content generated by subscribers of other services. This regulatory scheme clearly poses serious threats to the free flow of information throughout the on-line world and the free speech and privacy rights of individual users. Requiring carriers to pre-screen content is not only impossible because of the sheer volume of messages carried on each network, it would also violate current legal protections. S.314 would also expand current restrictions on access to indecent telephone audio-text services by minors under the age of 18 to cover similar content carried by telecommunications services (such as America On-line and the Internet). As amended by this provision, anyone who, "by means of telephone or telecommunications device, makes, transmits, or otherwise makes available (directly or by recording device) any indecent communication for commercial purposes which is available to any person under the age of 18 years of age or to any other person without that person's consent, regardless of whether the maker of such communication placed the call or initiated the communication" would be subject of a fine of $100,000 or two years in prison. This would force carries to act as private censors of all content available in public forums or file archives on their networks. Moreover, because there is no clear definition of indecency, and because of the strict liability imposed, carriers would have to restrict access to any content that could be possibly construed as indecent or obscene under the broadest interpretation. Public forums, discussion lists, file archives, and content available for commercial purposes will have to be meticulously screened and censored in order to avoid potential liability for the carrier, if S.314 is adopted. Such a scenario would severely limit the diversity of content available on on-line networks, and limit the editorial freedom of independent forum operators. Section (6) of S.314 would also amend the Electronic Communications Privacy Act (EPCA) to prevent the unauthorized interception and disclosure of "digital communications." Because the term "digital communication" is not defined, however, and because the EPCA currently precludes unauthorized interception and disclosure of "electronic communications" (which includes electronic mail and other forms of communications in digital form), the effect of this provision has no clear importance. Recommended Policy CIX opposes the Exon Amendment. Presently, most interactive technology, such as the software used to access on-line services e.g., America On-line and CompuServe, has the capability to limit access to certain types of services and selected information. Moreover, the electronic program guides being developed for interactive CATV networks also provide users with the capability to screen out certain channels or certain types of programming. In the on-line world, most content (with the exception of private communications initiated by consenting individuals) is transmitted by request. In other words, users must seek out the content they receive, whether it is by joining a discussion or accessing a file archives. By its nature, this technology provides ample control at the user level. Internet service providers in most cases act only as conduits of electronic transmissions initiated by individual subscribers. CIX, in conjunction with the Center for Democratic Technology and the Electronic Frontier Foundation, believes that the First Amendment will be better served by giving parents and other users the tools to select the information to which they (and their children) should have access. In the case of criminal content, the originator, not the carriers, should be responsible for their crimes. And, users (especially parents) should be empowered to determine what information they and their children have access to. If all carriers of electronic communications are forced to restrict content to avoid criminal liability, the usefulness of digital media for communications and information dissemination will be drastically limited. Finally, the Exon Amendment threatens the very existence of the on-line information access industry, including Internet Service Providers. 9. Subscriber Line Charges for Physical Channels Only CIX believes that subscriber line charges should be assessed on the basis of physical lines. Virtual line assessment impedes the development of LEC Transport services. Background ISDN, Frame Relay, and ATM can provide Internet users with switched high-speed digital Internet access, thereby allowing use of all its exciting features. While traditional telephone lines can provide a certain amount of Internet access, they cannot provide the speed necessary for users to access all of the available services. However, the FCC's Order requiring multiple SLCs for ISDN lines will seriously reduce the affordability of the service. The Order also will have the long-term effect of drying up demand for -- and investment in developing -- future services that make efficient use of the local loop, e.g., ATM. ISDN is important because it allows consumers to access on-line information services while still freeing their telephone line to make and receive voice calls. ISDN will facilitate telecommuting, because it allows economical and efficient high-speed on-line access to an office LAN or computer database. By combining the "B" channels, a telecommuter can communicate at up to 128 kbps. This is nearly 10 times the data rate of current 14.4 kbps analog modems, but with digital quality not found over standard telephone lines. The educational community is rapidly finding ISDN to be a valuable asset, as it affords students high-quality digital Internet and on-line database access over the D channel or one B channel, while freeing another B channel for administrative voice or data uses. The FCC's Order requires LECs to charge a separate SLC for each local exchange telephone service channel that is derived from a multichannel facility, such as ISDN. This Order would require LECs to charge two SLCs for an ISDN BRI service and 23 or 24 SLCs for an ISDN PRI service, rather than the current single SLC charge for each. Bell Atlantic estimates that an increase in the SLC is likely to price the service above most consumers willingness to pay, thereby reducing the potential consumer demand by 60%, or 100,000 customers over the next three years. The resulting increases in the price of ISDN services of up to 30% is expected to reduce future demand substantially, ranging from 25-35% for business services to 60% for the consumer market. Such price increases are also likely to cause 10-25% of current ISDN customers, who have already invested in expensive ISDN CPE, to terminate service. The Commission noted that the issues before it presented "difficult policy decisions," because the services are delivered over "network architectures that differ from those envisioned when the access charge rules were first adopted. The FCC labeled those issues "complex" and acknowledged that they "potentially impact other end user charges." Instead of examining the potential impact of its Order, the Commission suggested that any policy consideration should be addressed in the context of a "rule change, not a rule interpretation," in a separate rule-making proceeding. The FCC failed to recognize, however, that its decision resulted in the very policy change that it claimed to be deferring. Recommended Policy SLCs should be applicable only to physical lines, not virtual channels. Therefore, there should be only a single SLC on each ISDN line. Without a waiver, the Commission's recent order requiring multiple SLCs will dramatically increase network costs to residential and business rate-payers and accordingly reduce the use of applications requiring high speed transport. 10. Management of Internet Address and Name Space. CIX believes that, through the FCC Notice of Inquiry Process, the federal government should examine options for managing Internet address allocation, and other matters, to ensure fair allocation among Internet users. Background Internet Address and Name Space is currently inadequately supported and managed by Network Solutions, an NSF contractor. Current and expected inadequate support will severely hinder "information highway", (i.e., Internet), expansion. An Internet address is analogous to a telephone number. Internet address and name space are currently managed by Network Solutions, Inc., under a cooperative agreement with the NSF. The infrastructure is known as the Internet Network Information Center (InterNIC). The Internet Society's (ISOC) Internet Engineering Task Force (IETF), in conjunction with the Internet Assigned Numbers Authority (IANA) and the FNC, has developed guidelines for address and name space management. The InterNIC follows these guidelines to conserve and use efficiently the remaining IP address space. The InterNIC also operates root name servers. Unfortunately, because of the wide variety of commercial requirements, inadequate NSF funding, trademark issues, and the sheer volume of address space requests, the InterNIC is not able to keep-up with industry demand. There have been numerous accusations made over public forums that the InterNIC favors the large ISPs over the small ISPs with respect to IP address allocations. Domain Name Service (DNS) management is also controversial because the InterNIC does not check the trademark of the requested name. The domain name is the base component of the subscribers name on the Internet. While it can be expected that injured parties will seek remedy via trademark litigation, the InterNIC should verify name standing before issuing a domain name. Unfortunately, its mission scope and funding are not commensurate with this requirement. There are other "logical" issues that also need further definition and direction, such as commerciality of routing information, which is about to be provided by the Routing Arbiter, i.e., ISI and Merit under cooperative agreement with the NSF. Routing information is analogous to the FAA providing air traffic control. Central to the above issues is who owns the resource. Like Bellcore and the FAA, infrastructure such as the InterNIC requires ongoing funding and support as well as legal standing. Recommended Policy Through the Notice of Inquiry process, the FCC should develop policy for "logical" industry requirements, including management of Internet address and name space (analogous to spectrum), which would assure resources for large and small service providers and their customers, and a fair funding mechanism. IV. OTHER AREAS OF CONCERN There are several other areas of concern that hinder continued growth and proliferation of enhanced services. These areas include: Interstate Data Use Restrictions Existing Federal and state laws prohibit the use of certain types of information across state boundaries, e.g., telemedicine. These laws dramatically reduce the utility of the Internet and other ESP services. (The FDA has also included telemedicine systems within their regulatory scope.) Application-level national standards are necessary. Minimizing Government Competition The Federal Government has historically operated its own networks for both security and economic reasons. Unfortunately, some agencies have expanded their networking mission scope to include providing Internet access to universities and contractors. Privitization of Internet services should be preferred wherever possible. Government-Breakable Security Product Use Use of Government-mandated security products and technology, e.g., Clipper and Capstone, is inconsistent with commercial requirements. At the very least, Government should not mandate use of Government-owned security technology, and Government should not prohibit use of commercially-developed security products, e.g., RSA. Wire Tapping Government-mandated, e.g., Digital Telephony, wire tapping requirements, if any, are not onerous for ISPs, and ISPs should be fairly compensated for their costs of cooperation. _________________________________________________________________ CONCLUSION As technology provides more options for communicating, it is vitally important that consumers have sufficient choices responsive to their needs. While policy development has aggressively focused on competition among facilities-based carriers, similar attention should be focused on the development of the ESP industry. This need is more acute than ever because of the growing utility of ESP services such as the Internet. The above policy recommendations support this objective, and CIX is ready to assist legislators and policy decision makers to facilitate achievement of an optimized legal framework. FOR MORE INFORMATION, PLEASE CONTACT: Susan E. Fitzgerald CIX 1035 Sterling Road Suite 201 Herndon, VA 22071 Susan@CIX.ORG (703) 968-8490 Mark O'Connor, Esq. Executive Director Piper & Marbury 1200 - 19th Street, N.W. Washington, DC 20036 Wash/WA5HFSØ/BDH%Piper @MCIMAIL.COM (202) 861-6471 _________________________________________________________________ GLOSSARY AAV Alternate Access Vendor ATM Asynchronous Transfer Mode BBS Bulletin Board System BOC Bell Operating Company BRI Basic Rate Interface CATV Cable TV CDT Center for Democratic Technology CEI Comparably Efficient Interconnection CIX Commercial Internet eXchange DNS Domain Name Service ECPA Electronic Communications Privacy Act (18 USC 2511) ESP Enhanced Service Provider FAA Federal Aviation Administration FCC Federal Communications Commission (also used herein as the "Commission") FDA Food and Drug Administration FNC Federal Networking Council FR Frame Relay IETF Internet Engineering Task Force IP Internet Protocol ISDN Integrated Services Digital Network ISI Information Sciences Institute ISOC Internet Society ISP Internet Service Provider IXC IntereXchange Carrier LAN Local Area Network LEC Local Exchange Carrier MFS Metropolitan Fiber Systems NII National Information Infrastructure NSF National Science Foundation OCC Other Common Carrier ONA Open Network Architecture PC Personal Computer PCS Personal Communication System PRI Primary Rate Interface PVC Permanent Virtual Circuit RFC Request For Comment SLC Subscriber Line Charge SMDS Switched Multi-megabit Digital Service SVC Switched Virtual Circuit TCP/IP Transport Control Protocol/Internet Protocol TV Television USF Universal Service Fund VDT Video Dialtone VP Virtual Path _________________________________________________________________ DESCRIPTION OF SIGNIFICANT REGULATORY TERMS Comparably Efficient Interconnection (CEI) A carrier subject to the ONA requirements (described below) must provide competing carriers with Comparably Efficient Interconnection. In practical terms, this means that the BOCs and AT&T must provide competitors access to basic services comparable to the access they use in supplying their own enhanced services. CEI has a service-specific emphasis, whereas ONA is the overall design of a carrier's basic network facilities and services. Eventually, the FCC intended ONA to overtake CEI, because a carrier that offers enhanced services and a competitor offering similar services in an ONA environment would utilize the same basic network on an equivalent basis. Open Network Architecture (ONA) The ONA principles are a set of nonstructural safeguards designed to prevent discrimination between carriers and promote efficiency of the telecommunications network. These goals are reached in part by preserving competition through the control of potential anti-competitive behavior and by permitting the technical integration of basic and enhanced services. Major principles include (1) the provision of unbundled "basic service elements" and the resale of such basic elements to all carriers on a tariffed basis, (2) implementation of a technical design that satisfies the independent CEI requirements, (3) the development of specific network designs in the private sector, and (4) the filing of ONA plans by AT&T and the BOCs. ONA is an evolving concept intended to free AT&T and the BOCs of previous structural separation requirements while preserving the integrity of the telecommunications marketplace. Universal Service Fund (USF) The USF is a fund designed to compensate local exchange carriers that service areas with unusually high local loop costs. The fund is paid through access charges assessed against interexchange carriers that connect with the local exchange network. Each LEC files with NECA an annual study of the actual costs of providing the local loops in a given study area, as well as semiannual reports describing the IXCs with customers in its service area. On the basis of the studies. National Exchange Carrier Association (NECA) develops a national average local loop cost. NECA then collects the charges from the IXCs and distributes the USF payments to the LECs that have unusually high local loop costs. The FCC's rules provide additional USF assistance to LECs in high-cost study areas with less than 200,000 local loops. Because of the expansion of USF obligations, the FCC has implemented measures to curb its growth. The FCC is also conducting a broad inquiry into alternatives to the current regime. Video Dialtone (VDT) Video dialtone permits the provision of video communications by third parties to their end user subscribers through the local exchange carrier's network. Under the traditional video dialtone model, the LEC provides a "platform" for end users to access programming and other information from video service providers, i.e., it provides the network, switching capabilities, as well as some gateway and enhanced services, while others provide the content. The video platform must accommodate multiple video providers and must expand as demand for access increases. The video network would operate in a manner similar to the telephone network, with switching capabilities that allow end users to send video messages to one another and/or to video programmers. Historically, the LECs have been prohibited by both statute and regulation from owning any substantial interest in the video service provider customers or from controlling the content of programming offered by those customers. However, recent court decisions have threatened to break down these traditional safeguards that prevent the LECs from directly offering video services, and the FCC is currently in the process of reexamining its video dialtone rules. _________________________________________________________________ CIX is a registered trademark of the Commercial Internet eXchange Association _________________________________________________________________ Comments or suggestions are always welcome. _________________________________________________________________ CIX Telecommunications White Paper / CIX / webmaster@cix.org