How Should We Think About IP-PSTN Interconnection?

1. How Should We Think About IP-PSTN Interconnection? NARUC Committee on Telecommunications February 19, 2008

2. What’s So Special About the PSTN? • The Public Switched Telephone Network (PSTN) has: • Ubiquitous deployment and affordable service (accomplished, in part through build-out mandates funded through USF and access charges) • Prohibitions, or at least limitations, on call blocking • Mandated interconnection • There are also Private Networks: • Corporate voice telecommunications networks • Voice information services (e.g., speech enabled IM) • Interconnection pursuant to contract and antitrust rules • There possibly are networks that are “Hybrids” • Wireless (may have to interconnect directly with CLECs) • Nomadic VoIP (may have contract-based IP-IP interconnection, including refusal to interconnect and right to block) • Where will “Fixed VoIP” networks be placed? IP-PSTN Interconnection| February 19, 2008 | EMBARQ CORPORATION | NARUC Committee on Telecommunications| PAGE 2

3. Rules Should Vary Based on Service Rather Than Technology • IP is a technology rather than a network • The PSTN could be all IP • There have been several shifts in technology on both the PSTN and private networks (e.g., analog to digital). • It would be foolish to do regulate based on technology: • Technological arbitrage would follow, causing major costs and potentially undermining public policy goals. • Regulation would interfere with efficient development and deployment of new technologies. • Interconnection should be reciprocal on the PSTN. • Example: problems with number portability • Example: need for clear signaling rules, like proposed by USTelecom IP-PSTN Interconnection| February 19, 2008 | EMBARQ CORPORATION | NARUC Committee on Telecommunications| PAGE 3

4. Mechanics of IP-PSTN Origination • IP call origination actually looks a lot like PSTN call origination, as shown on the next slide. • It uses same signaling, public safety, CALEA, and other databases and servers. • Assigns the same NANPA numbers for incoming PSTN calls. • A big difference is the separation of call control (intelligence) from call handling, which creates many efficiencies. • VoIP is also packet-based (like ATM), which offers shared transmission with other packet-based services. • IP calling can also be handled without use of the PSTN when both the calling and called parties are served using IP. This traffic is not implicated by an IP-PSTN policy or rule. IP-PSTN Interconnection| February 19, 2008 | EMBARQ CORPORATION | NARUC Committee on Telecommunications| PAGE 4

5. Cisco Network Configuration for Voice over Broadband Switch Databases and PSTN Switch IP-PSTN Interconnection| February 19, 2008 | EMBARQ CORPORATION | NARUC Committee on Telecommunications| PAGE 5

6. Mechanics of IP-PSTN Origination (con’t) • Lists of new and innovative call features offered with VoIP often look a lot like lists of PSTN call features. For example, EQ will offer the following over the PSTN: • ICF (EMBARQ Find Me Follow Me with EMBARQ Call Transfer) • Network Address Book • Unified Messaging • SMS to Landline • Voice to Screen • Home and Small Office Hub • If an IP provider does not want to perform the PSTN conversion, EQ and other LECs could accept the traffic in IP and perform the conversion to the PSTN • The real difficulty is distinguishing IP-originated traffic from other traffic once it has been put onto the PSTN. IP-PSTN Interconnection| February 19, 2008 | EMBARQ CORPORATION | NARUC Committee on Telecommunications| PAGE 6

7. Treatment of IP-PSTN Traffic Today • The best assessment is that most IP-PSTN traffic is being delivered pursuant to normal PSTN access rules. • We do not yet appear to be seeing significantly disproportionate reductions in access minutes. • Some interconnection agreements specify PSTN treatment. • Others specify preferential treatment. • Most IP-PSTN traffic appears to contain CPN. • Customers likely would be upset if it were not included. • The “one call” approach applied using Called Party number and CPN generally works, particularly in light of factoring arrangements. • IP-originated traffic is hard to distinguish from other traffic once on the PSTN. • Some carriers do claim the ESP Exemption and refuse to pay more than reciprocal compensation for terminating access. IP-PSTN Interconnection| February 19, 2008 | EMBARQ CORPORATION | NARUC Committee on Telecommunications| PAGE 7

8. “Old Rules for the Old Network; New Rules for the New Networks” • The best policy for the PSTN, and for the future of private networks is a clear dividing line between networks. • Disputes/issues are often based on money flows, and reflect efforts to gain preferential terms in compensation. • Compensation on private networks: • Regulators won’t impose build-out mandates (at least not without compensation) where it is uneconomic. • Regulators won’t force interconnection at regulated rates. • Compensation on the PSTN: • Any build-out mandates will be fully (and ideally, explicitly) funded. • Regulators won’t force LECs to originate voice traffic to, or terminate traffic from, private networks on preferential terms. IP-PSTN Interconnection| February 19, 2008 | EMBARQ CORPORATION | NARUC Committee on Telecommunications| PAGE 8

9. Competitive Neutrality & Contribution to Carrier-of-Last-Resort Obligations • It is important that regulation not further skew competition between voice providers. • Cable providers and others using IP call technology do not need additional competitive advantages. • Perhaps some IP-based services will be deemed part of the PSTN; perhaps not. • In either case, it is important that IP-PSTN traffic continue to contribute to the cost of carrier-of-last-resort obligations until intercarrier compensation is reformed. • Otherwise, new USF support will be required or service to high-cost areas will collapse. IP-PSTN Interconnection| February 19, 2008 | EMBARQ CORPORATION | NARUC Committee on Telecommunications| PAGE 9