The Essential Truths of Communications Infrastructure Providers: Their Conduct and the Standards that we hold them to.

It’s  a cliche heard often: “we live in a connected world”; yet it rings true for individuals, professionals, and instituions that depend on such networks for vital personal and commercial communications. Just ask any teenager what being connected means to them.  We derive value by  connecting via our network providers, be they wired or wireless systems, EDI Networks, electric and natural gas utilities, all utilities, to be frank. Network Providers, in turn, enhance their value by cooperating with, and connecting to competitive network operators via interconnections, increasing the total reachable subscriber population.  We are now able to send a message to almost anyone around the globe via email or text message. Such communications ubiquity was considered a pipe dream as late as the 1970’s, before AT&T’s divestiture.  Many innovations  we today take for granted, have their roots in the breaking of AT&T’s monopoly. I will expand on the that historical concept a bit later.

Thus, we discover a term of art that is not  in common use: ‘Network Effect’ or ‘The Network Effect’.  The definition of Network Effect is: “Systems that grow in value as the number of connected subscribers and networked resources are increased. So, commensurate with the size of a networked population, such is the value of the network. Some markets could never be sustainable without putting strategies in place to specifically grow the user population – thus creating an incentive for new subscribers to get on board. Sometimes these strategies seem counterintuitive, such as when competitors interconnect with each other – not only out of necessity, but to increase the value of the market. An increase in network resources or subscriber population (they are the same), also confers on any one network additional influence – if one network is left unchecked to acquire competitors with abandon (with private or sovereign wealth), then network effects will lead to monopolies and an unhealthy competitive climate for innovation to occur (why would a business remain in the market, or continue funding its R&D if one competitor held the largest and / or most influential user populations).

We have always needed competitors to interconnect, which is obvious if you give it a little thought. No one network could possibly herd all of the world’s (or even one country’s) subscribers into its captive claws while fostering competition and innovation.  That very situation existed in the early 20th century –  from the founding of AT&T, to its decades long march buying up every local telephone provider and a few regionals, plus their colossal efforts to create the first, and for a time, the only long haul network – AT&T came as close as any to finding itself in the position of a “Beneficial Monopoly”. In other words, the government and AT&T’s attenuated competition just about gave up, ceding to AT&T the right to exist sans competitors. Thank goodness for MCI and Bill McGowan, and the DOJ, later the FCC, who stepped in and stopped such madness. AT&T remaining in control of the nation’s telecommunications would have left all of us bereft of an Internet, mobile phones, and countless other innovations we consider commonplace.

Today’s networked IP (Internet Protocol)  markets were designed from the start to be composed of a fabric of loosely interconnected ISP’s, Backbone transit networks, and private / commercial / educational / Government Internet Exchange Points (IXPs) – it’s a wonderful system that both capitalized on some of AT&Ts technology, Federal research funding,  and Bell Labs cooperation with other ARPA members (MITRE, BBN, GTE, countless defense contractors, and many Universities).

So, finally, we come to the Title of this article, “The Essential Truths of Communications Infrastructure Providers – Their Conduct (and the standards) that we hold them to”.

Here are few to get the ball rolling:

#1) One essential truth applies to all Networks, and it is the above discussed network effect. We expect our Network providers to cooperate within their respective industries, to grow the user population by cooperative interconnection policys, while nurturing the technical standards for interoperability. The Internet is a model of open access for new entrants and original web based services, first and foremost due to the adherence to standards; comply with the standards and you can attach to the network. (SMTP for email, HTTP for web, DNS for address resolution, and many more). Standards and collegial interconnection policies are responsible for our fertile and robust Internet applications and infrastructure market. Think of it this way: email is great! You can send it anywhere, and with the exception of the very young, very very old (although many seniors  are enthusiastic Internet users), you can reach anyone via one standardized platform operated by countless independent ISPs. Not bad, eh?

#2) We hold our providers to certain standards of reliability, privacy, and general conduct – just look at the recent (and ongoing) Facebook problems regarding privacy (sharing too much), trust (disclosing personal data to third parties and law enforcement) , security (a vector for malware). We all have very low expectation of the United States Postal Service – I’m sorry, but they are the gold standard in mail delivery when compared to their overseas cousins –  and changes are in store for USPS that we won’t like; I could go on with examples from wireless carriers, fixed broadband providers, and utilities, but I’m sure the my readers reader get my gist. EDI users, VAN clients in particular, expect that their network members ID’s are not being re marketed, but the technology or audits to ensure privacy over routed VAN systems has never been extant.

#3) We also have expectations transcending performance and reliability.  We have every right to expect that our network operators will coexist and interoperate with their competition, thus creating a unified, global system via cooperative interconnections. We have this in telephone voice networks, in IP (Internet) networks, and all types of mobile applications (email & web, and more) built atop such networks that  inherent the power of the networks wide availability and reach. We fully expect email messages to find their destination – we have similar expectations of our voice services, text messages, and Internet services. We do not want to hear that a network provider has blocked or isolated our ‘reaching out‘ to other subscribers, on a competitive network.  Ditto for others that want to reach us from other networks.

The essential truth: We expect our data to flow, and that competitive leverage not be applied in any way to lessen or block any subscribers traffic – Short form, don’t use interconnections as a means of competitive force. Ugly ugly ugly, and we have a historical example:

Would you accept any service that stopped your email from reaching grandmother’s mailbox? What if certain websites became unavailable due to a competitive spat between your Internet provider, and a giant like Verizon? Only 40 years ago, a war was fought over AT&T’s hegemony over local and long distance telephony – however, the ultimate win or lose battle was fought over MCI’s rights to route calls to/ from the AT&T network. This was important because MCI had existing intrastate switching capacity that delivered better quality at lower rates to new corporate and residential customers. MCI did this by obtaining some of the first available COTS microwave relays equipment for multiplexing dozens of voice circuits (trunking) over a single microwave channel . However if MCI’s subscribers remained unable to reach 90% of USA telephone subscribers on AT&T’s mammoth long distance and local phone networks, (AT&T held the lion share of all local and long-distance markets), then operating as a competitor was of no use.

You see, networks are very different than other markets based on physical goods or stationary services – the total value of a connected market is directly commensurate with the interconnections that tie competitors together, creating an environment of services ubiquity, while expanding the total market. Interconnections Create the market’s entire value.

The above axiom regarding interconnections took hold after AT&T’s divestiture was finalized in the early 1980’s. Today, we can hardly imagine a market where your destination party’s network matters. It sure used to matter in the past,  where the time of call and the location of the called party would greatly impact pricing, in those days of AT&T’s hegemony. Those days are now over for telephony and IP networks., and in many more connected markets of which you may not be familiar with: petro and gas pipelines –  metropolitan ethernet (private data networks used by multi site businesses, and some internet access), cellular and SMR (digital two-way radio) tower backhaul, freight loading docks located at cross continent warehouses, and access to marine port facilities and airfreight terminals (even if privately owned by giants).

All of these markets share certain features, and are called, “essential facilities”, i.e., electronic communications or physical transport facilities grown to immense proportions, becoming, indispensable common carriers (common carriage means that a facility must service anyone willing to pay, and may be compelled to serve all comers).

Regulations control most common carriers, who and what may be compelled to grant common access to the ‘essential facilities’ (via interconnections) of their competitors. We have seen ample legal precedent for applying common carriage law to networks, such as power grids, access to technical service information, certain exclusive parts inventories, and geographically held physical advertising properties. Even general incentives (group discount programs), and physical access have been fair game for antitrust actions and the application of Common Carriage law. (several such ‘access marker’ cases were litigated in the famous Aspen Skiing v.  Aspen Highlands skiing chair-lift promotion case, where a smaller competitor was prevented from participation in a group lift ticket promotion, and use of a common, private road that was held by the larger competitor). All of the foregoing are examples of standards of conduct for network operators to consider.

That one landmark case of MCI v. AT&T, was  tied to DOJ and FCC antitrust actions, which eventually led to AT&T’s divestiture, and the appropriate tariffing to ensure that telephone services grew amidst thriving competition, producing a market that was accesible and transparent for consumers and businesses alike.

That’s an awful long preamble to just to get to the following statement: “We expect certain behaviors from network providers” –  In the following articles, I will connect this to the troubled state of EDI Communications via VAN, the exodus to AS2 and closed trading hubs, and the very mistaken trade-off we have bargained for in not supporting a fully addressable and routable system – one that is presently being perverted by one of its largest incumbent operators. Stay tuned.

Comments are closed.