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49
Private Investment and Federal National Information Infrastructure
Policy
Organization for the Protection and Advancement of Small
Telephone Companies (OPASTCO)
Introduction and Statement of the
Problem
The Organization for the Protection and Advancement of Small
Telephone Companies (OPASTCO) is a national trade association
representing nearly 450 small, independently owned and operated
telephone systems serving primarily rural areas of the United
States and Canada. OPASTCO membership includes both commercial and
cooperative telephone companies, which range in size from fewer
than 100 to 50,000 access lines and collectively serve nearly 2
million customers.
This white paper examines network deployment, specifically, the
networks used to access information providers, the location of
customers trying to access the information, and the problems
associated with connecting to the information providers from rural
areas. The information providers' databases are unique entities
that are separate from the network providers and their networks
used to access them and are beyond the scope of this paper.
Further, this paper suggests solutions to networking technology
investment problems. The following five such problems, or barriers,
typical to small, rural telephone companies are discussed in this
paper:
1.
Limited local calling areas requiring toll
access,
2.
Long loops with load coils and station
carrier,
3.
Interconnection availability and distance,
4.
Limited but great needs, and
5.
High cost due to poor economies of scale.
Existing Network Deployment and
Definitions
The information market consists of information providers,
network providers, and customers. While OPASTCO and its members
fall into the category of network providers, they may have some
freedom that the regional Bell operating companies (RBOCs) do not
because of Modified Final Judgment (MFJ) restrictions that apply
only to GTE and the RBOCs. Information providers rarely provide
their own network. Instead, they lease access from network
providers that add a surcharge based on the number of minutes
connected or packets transferred. In metropolitan areas, customers
dial a local number or lease an inexpensive high-speed local direct
connection to the local node for higher speed to information
providers. In most rural areas, the customer is forced to dial a
long-distance number and pay per-minute toll charges directly, or
dial an 800 number and pay an hourly surcharge to the information
provider. Having toll and 800 number access usually doubles or
triples that cost of access depending on the minimum hourly or
subscription cost that the information provider charges.
Today, data networks fall into three categories: private data,
data packet, and high-speed open interface. The first type, private
data, are networks that companies and government units build or
lease. These networks may be privately owned and built or leased
from local exchange carriers (LECs), interexchange carriers (IXCs),
and data packet network providers, or any combination of the three.
Private data networks can be truly separate
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networks or virtual private networks sharing equipment, but they
cannot be truly interconnected except through an optional gateway
node. These networks are relatively expensive, with high start-up
costs. However, such networks exist, and if the company or
government unit can justify the need, there are few technical
problems or problems obtaining return on investment by small
telephone companies in providing this type of network.
The second type of networks are first generation, usually x.25,
special data packet networks. Tymnet and Telenet are examples of
special data packet network providers. These networks are provided
by IXCs, large regional LECs, and special data packet network
providers. The high cost of the initial investment, limited speed
and capabilities, and limited willingness to interconnect small
nodes to the existing networks have limited the existing
participation in providing data packet network access by small,
rural telephone companies. High-speed open interface is the third
type of networks. Router and ATM switched networks, as well as the
Internet, are examples of high-speed open interface networks. The
Internet is an interconnection of numerous networks supported by
regional, nationwide, and worldwide networks that provide access to
a host of information sources, as well as electronic mail to anyone
connected to the "net." However, the Internet in its existing
configuration and capability is not the complete functional network
that is needed to provide the full range of services desired by
information providers, private industry, universities, and other
small business and residential information users.
Analysis of Problems and Alternative
Solutions
Barrier 1: Limited Local Calling Areas
Requiring Toll Access
The key to affordable information access for residential and
small business customers is local access to the networks that
provide access to the information providers. Unfortunately, few
rural communities have network nodes. Only those small exchanges
close enough to metropolitan areas to have extended area service
can access the network providers with a local or toll-free call.
Many special data packet network providers place nodes in calling
areas that have a population of at least 100,000, but some require
areas to have a population of at least 250,000.
Special data packet providers are telecommunications providers
that use local networks to connect customers with various
information providers for a profit. Normally, they order standard
business lines from the LEC and install banks of modems
concentrated with packet assemblers and share the backbone
transmission link between metropolitan nodes. IXCs are required to
pay the LEC for originating and terminating access on a flat rate
per trunk or on a per-minute-of-use basis. The packet data network
providers currently are exempted from paying access revenues to the
LEC.
One factor to consider when planning to provide local data
access from a small telephone company is the lost toll revenue from
current subscribers to information service providers. In addition,
if local access is provided and the volume of local calling
increases significantly because of the highly elastic nature of
information services, there will be an increased investment in
equipment and a decrease in revenue. For small telephone companies
that have cost-based toll settlements through the National Exchange
Carrier Association, the impact of the loss in direct toll revenue
and the jump in local calling dramatically shifts the revenue
requirement from the toll to local, which forces local rates to
increase. Average schedule companies experience the loss in toll
revenue but are not aware of the negative double shift in revenue
impacts of increased local usage. Any national policy to foster
investment in infrastructure should assess the impacts to both cost
and average schedule companies.
Integrated services digital network (ISDN) has not been deployed
to any extent in rural markets because the switching systems
commonly used by small telephone companies do not have ISDN
available yet or they have just recently made it available, or the
cost to add ISDN services is too high for the limited rural market.
Even overlay networks that allow a small initial investment to
provide small quantities of ISDN service are high in cost when
considered on a per-line basis. As the ISDN market penetration
increases throughout the country, increased pressure to provide
ISDN in the rural markets will occur. Unfortunately, ISDN services
are basically local services, and unless the network provider has a
local ISDN node, the high cost of ISDN toll access remains a
barrier. Fortunately, in the last year, 28,800-baud modems with
error correction and compression have improved voice-grade lines'
data access speeds considerably.
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The only technical solution to the local access barrier that
exists today is to provide local access. The following is an
examination of the barriers that should be reduced to make local
access more feasible.
Barrier 2: Long Loops with Load Coils
and Station Carrier
Both load coils and analog carrier limit data capability to
voice grade circuits. The maximum bandwidth of all voice grade
lines is 4,000 Hz, which may limit data transmission to 7,200 baud
or less. Analog carrier in addition to bandwidth limitations also
has limited custom local area signaling service (CLASS) capability
and for 5 years has been in an industry-wide phaseout. Only within
the last 2 years has there been any trend toward eliminating loaded
loops.
According to the USDA-REA 1992 Telephone Loop Study, the
average loop length was 4.11 miles, and 17.84 percent were greater
than 6.1 miles. In 1969, the average loop length was 3.3 miles, and
about 20 percent of the loops were greater than 6.1 miles; at the
same time, less than 2 percent of the Bell companies' loops were
greater than 6.1 miles, and they averaged only 2.16 miles. When
there was an effort to reduce loaded loops, the increase in average
loop length was probably due to a conversion from multiparty lines
to all one-party service.
The USDA-REA study also showed that in 1992 38 percent of the
REA loops studied used load coils to enhance voice transmission,
which was down only 1 percent from 39 percent in 1985. Fortunately,
in 1992, only 2.1 percent of the loops studied were served via
analog station carrier.
Long rural loops with load coils and analog station carrier
limit dial-up access only slightly, but they do not allow for ISDN
or higher data speeds. If only one or a few lines of high-speed
data are required, then special data circuits can be built, but
only at high per-circuit cost. If ubiquitous service is required,
an entire system redesign may be required.
For the last 10 years, there has been a trend to minimize loaded
loops, but only within the last 2 years have rural, independent
telephone companies considered totally eliminating loaded loops
with remotes or digital serving areas and loops limited from 12,000
to 18,000 feet. Until now, these designs have been implemented to
reinforce for high growth or to transition fiber in the loop to
replace deteriorated air core cables.
If ubiquitous high-speed data service is the objective, then
considerable investment in digital serving area facilities will be
required. An evolving definition of universal service and a
continuation of the Universal Service Fund (USF) for high-cost
areas will be necessary to foster the added investment in the
infrastructure.
Barrier 3: Interconnection
Availability and Distance
One factor in availability is the distance from rural exchanges
to the nearest network providers. Network providers have
established access nodes in most metropolitan areas with a
population of 100,000. The distance from these access nodes to
rural exchanges can vary from 20 to 500 or more miles. The cost for
transport of 56 kbps and T-1 or higher speed data circuits is
distance dependent. If multiple incompatible or proprietary network
connections are required, then the already high cost for transport
multiplies.
Another factor in availability is finding a willing network
access provider to connect to an independent telephone company
network. To date, only regional Internet providers have been
willing to provide direct independent data network connections.
One solution to the lack of available network connections would
be a single standardized network enabling a common transport link,
as well as lower costs to build in the desired redundancy. Another
solution would be to establish regional hub nodes that would
decrease the distance of transport, thus allowing a number of
companies to share the cost of common transport to the metro nodes.
One example of a regional hub network has been implemented by
Minnesota Equal Access Network Services (MEANS) and Iowa Network
Systems (INS). Together the companies have built statewide networks
to share in the cost of nodes and transport.
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Barrier 4: Limited But Great
Needs
While there may not be a great demand in rural areas for
communications in terms of numbers and volume, there is a great
demand for communications, and data communications in particular,
due to the travel distances and the need to be competitive with
urban areas. Rural areas strive to expand employment and increase
economic development, and providing up-to-date communications is
imperative for high-technology jobs and is needed to attract
business to rural areas.
There is no solution to the problem of travel distances and the
need for communications in rural areas beyond providing for the
basic communications needs of rural customers.
Barrier 5: High Cost Due to Poor
Economies of Scale
The average OPASTCO member company serves approximately 6,000
customers, and the average exchange or wire center has
approximately 1,200 access lines; compare that to a population of
100,000 or even 250,000, which is necessary for some data packet
network providers to invest in a node. The high minimum cost of
investment coupled with comparatively few customers and a low
volume of data traffic make the cost per customer or volume of
traffic much higher than in urban areas. In addition to the high
cost of investment in equipment and transport, an even higher cost
may be required for test equipment, training for maintenance staff,
and training and staffing for customer support. In addition to the
training of support staff, an additional cost or barrier to
marketing data network technology in rural areas is educating
customers to the benefits and general use of computers.
One partial solution would be standardized modular node
equipment manufactured in volumes large enough to reduce the cost
per node. Again, if single network and regional hubs were
implemented, the costs per customer could be reduced. Shared
networks and even a shared pool of test equipment and support
personnel could further reduce costs.
Continued application of dial equipment minutes (DEM) weighting
and further application to data networking equipment are existing
mechanisms for recovering the cost of investment and keeping the
costs to rural customers at an affordable level.
Recommendations and Summary
Standards development, standard equipment, regional hubs, and a
single common data network are partial solutions to the problems of
providing affordable data network access to rural areas. Further,
an evolving definition of universal service and the continued or
expanded application of the USF coupled with continued or expanded
DEM weighting are necessary to provide affordable information
services to rural America.
Representative terms from entire chapter:
telephone companies
