The State of Competition From a Technological Perspective

The State of Competition From a Technological Perspective


It is useful and, by now, almost traditional to look at the Public Switched Telecommunications Network (PSTN) as being composed of five parts:
  1. the terminal equipment and inside wiring portion on the subscriber's premises;
  2. the subscriber access or local loop portion of the network between the subscriber's premises and the local switch or central office;
  3. the local switching portion;
  4. the metropolitan area portion of the network interconnecting those central offices and the "points of presence," or switching systems, of the long-distance carriers; and
  5. the interexchange or long-haul portion of the network.
To these five parts customer premises equipment, local loops, local switching, metropolitan area-interoffice transport, and the interchange network I would add a sixth by dividing the local exchange switching functions into two parts: (1) basic call processing, the lower level functions associated with making connections between and among subscriber lines and interoffice trunks and (2) the higher level, software-based service logic functions and their associated data bases. Of course, it is this separation of basic call processing from the service logic and associated data bases that is leading to the creation of the "Intelligent Network" and the offering of services like Personal Number Calling.

At one time not really so long ago all of these portions of the network were regarded as part of one large natural monopoly. The notion that the entire network all six parts, if you will exhibited natural monopoly characteristics was challenged by rapid technological changes, such as the development of microwave radio, and a lot of rethinking on the part of policy analysts and regulators. There is no need for me to repeat the regulatory history, but, as you all know, the customer premises equipment and long-haul portions of the network were "unbundled" from the other four portions of the local exchange network namely, subscriber access, the two parts of local switching, and local transport. Competition was then allowed in these unbundled portions, and that competition is now well established in both areas. And I think it is fair to say that many policy analysts believed, initially at least, that the local exchange network comprising the four remaining parts still constituted a natural monopoly.

Viewed in a historical context like this, it is not too surprising that the natural monopoly status of the local exchange network is now being challenged. As a result of actions at the federal level (in terms of interstate services) and by selected public utility commissions at the state level (in terms of intrastate services), competition is emerging in the transport portion of the local exchange network and, to a certain extent, in local switching as well. From a purely technological perspective, there is even some prospect for intermodal competition e.g., from wireless technologies for the local loop itself.

Thus, from my perspective as an engineer, the key public policy issues are associated with the local exchange portion of our nation's telecommunications infrastructure.