THE BLOG
01/07/2013 12:26 pm ET Updated Mar 09, 2013

What Are the Public Switched Telephone Networks, 'PSTN' and Why You Should Care?

Manipulated data and definitions are being used to manipulate public policies.

The public switched telephone network is not a single-use network. Modern network infrastructure can provide access not only to voice services, but also to data, graphics, video, and other services.

(FCC's Connect America Fund FCC (CAF) Order in 2011).

It appears that you can fool most of the people most of the time. AT&T has proven that if you spend a boatload of money and repeat the same deceptive statements over and over, (and have a media that just parrots the statements), the public will believe anything you want them to.

The term "Public Switched Telephone Networks" (PSTN) or the word 'utility' is case in point. They have come to mean 'bad' or "old" or other derogatory labels. They claim that the entire PSTN networks are just for "POTs", Plain Old Telephone Service) -- voice phone calling only. Truth be told, AT&T, Verizon et al has snookered you.

And you should care because:

  • AT&T-Verizon, with the help of the American Legislative Exchange Council -- are closing down the PSTN -- abandoning about ½ of America and creating new "Digital Dead Zones" -- regardless of the actual facts.
  • Your wireless services are controlled by the wires as most cell sites or Wi-Fi hot spots are connected to a wire and everything from 'bandwidth caps' or the cost of wireless service are controlled by the controllers of the wires.
  • It already cost you thousands of dollars and has done economic harms to your community.
  • The plan is to remove all telecom regulations and obligations, which impacts all services in the U.S., from who gets high speed service, competition for all services, including cable service, or the price of service.
  • It impacts other intangible things such as Net Neutrality, SOPA-SIPA proposed laws or privacy or AT&T and Verizon acting as warrantless policeman.

What is the PSTN? Regardless of what you been told, the PSTN, the state-based utility, are the wires into your home or office, school or library. It is not just phone service, commonly known as POTs, but the networks. And it is supposed to be able to handle ALL services -- broadband, Internet, cable, phone and even VOIP service. And these networks were supposed to allow any competitor to offer you service. And this wire, regardless of the current condition or technology, should have already been upgraded to a fiber optic -- very fast service; it was never supposed to remain the old copper wiring. You paid thousands of dollars for these upgrades. And the utility wires were supposed to supply all of these services to everyone -- rural customers as well as the urban customers.

And yet, through a manipulation of data, there has been a campaign to fool the public and the media with the goal to keep the caretakers of these essential networks, the PSTN, in control and to even privatize these publicly funded networks so that the companies can block competition, raise rates, and most importantly remove regulations and any obligations.

The rest of this article details the truth about the Public Switched Telephone Networks.

1) The PSTN Was Never just "POTS" but Is ALL Services Over the Wire.

To repeat the opening quote from the FCC's Connect America Fund FCC (CAF) Order in 2011, the PSTN is not just phone service or "POTs"; it is all services.

The public switched telephone network is not a single-use network. Modern network infrastructure can provide access not only to voice services, but also to data, graphics, video, and other services.

Or the legal definition: ("public switched network" in 47 C.F.R. 20.3):

Public Switched Network. Any common carrier switched network, whether by wire or radio, including local exchange carriers, interexchange carriers, and mobile service providers that use the North American Numbering Plan in connection with the provision of switched services.

The "PSTN" is, simply put, the many interconnected "common carrier" networks that use telephone numbers. It has nothing to do with the technology any of them use. (I'll return to 'common carriage' in a moment.)

2) The PSTN was supposed to be Upgraded to Fiber Optics for All Services.

New Jersey State law, still on the books in 2012, states that the PSTN was for high speed data services, broadband and video, which included cable programming.

D. NJ BELL'S PLAN FOR AN ALTERNATIVE FORM OF REGULATION MAY 21, 1992 --- NJ Bell's plan declares that its approval by the Board would provide the foundation for NJ Bell's acceleration of an information age network in Now Jersey and referred to by NJ Bell as 'Opportunity New Jersey'. Opportunity New Jersey would accelerate the deployment of key network technologies to make available advanced intelligent network, narrowband digital, wideband digital, and broadband digital service capabilities in the public switched network, and thereby accelerate the transformation of NJ Bell's public switched network, which today transports voiceband services (voice, facsimile and low speed data), to a public switched network, which transports video and high speed data services in addition to voiceband services.

That was 20 years ago...

3) The Entire PSTN Utility was to be Upgraded to Provide 100% of Customers with a Fiber Optic Future.

In 2012, the New Jersey Board of Public Utilities issued a show cause order to have Verizon, New Jersey explain why they had not completed 100% of the state by 2010 with a fiber optic wire that could supply 45 Mbps in both directions.

In state after state, laws were changed to rewire the PSTN, supposedly removing the old copper wiring and replacing it with fiber optic services.

  • Connecticut was to spend4.5 billion and have the state completed by 2007.
  • Pennsylvania is supposed to be completed by 2015;
  • California was to have 5.5 million homes completed by 2000, and spend16 billion dollars.

While each state was different, the fact is no state was ever completed. And worse, in mant states the schools, libraries, hospitals and even government agencies should have been upgraded to fiber optic services.

4) You Were Charged Thousands of Dollars for the PSTN to be Upgraded.

We estimate that by the end of 2012, now-AT&T, Verizon and Centurylink collected $360 billion dollars from changes in state and federal laws that gave (and still give) the companies billions per state--by charging customers extra on their phone bills.

The scam was simple: The companies went state to state and got laws changed based on a contract that said - add extra charges to the customers' bills and these excess profits will be used for new construction and upgrades. Then the phone companies pocketed the money. Our report from 2002 highlighted how these excess profits ended up being used for overseas investments, executive pay and other non-construction spending.

5) What about AT&T's U-Verse and Verizon's FiOS? Follow the Money. The Companies are Privatizing Publicly Funded PSTN Networks.

In 2004, after Verizon and AT&T used the promise of these new, second round of upgrades, Verizon's FiOS and AT&T's U-Verse, to get rid of the obligation to rent these utility PSTN wires to competitors, which was mandated by the Telecom Act of 1996 (and is even in state laws). AT&T and Verizon were able to create separate subsidiaries that got the utility customers to fund these new services, but most of the revenues appears to be going into other 'non-utility' bank accounts.

It had been a massive privatization of publicly funded networks - I.e., it appears that Verizon FiOS construction budgets are not new expenditures but the company has been using the utility construction budgets to create these 'cable services'. AT&T has done the same thing, and their recent announcement to spend an additional $14 billion on upgrades is, again, not new expenditures but mostly a restatement of the normal construction budgets - monies that were supposed to be used to upgrade the utility, PSTN plant.

6) You Were Charged Multiple Times for Services You Will Most Likely Never Get.

In our report, "Verizon's State-Based Financial Issues & Tax Losses: The Destruction of America's Telecommunications Utilities, the Public Switched Telephone Networks (PSTN)", we outline in five Verizon states the wholesale dismantling of the PSTN by Verizon moving profitable assets out of the utility bucket while dumping expenses into the utility-PSTN part of the company - and this includes everything from DSL and broadband to even wireless expenses. This dumping of expenses, combined with the companies' affiliates not paying their fair share results in major losses for the PSTN. Verizon, New York claimed to have lost $2.2. billion dollars in just 2010, with a 'tax benefit' of $716 million in state and federal taxes.

Claiming losses, Verizon went back to the regulators and got rate increases. However, Verizon announced that they are 'abandoning the PSTN' and so customers in these areas are paying rate increases for services that they will never receive.

And I need to make two things clear -- New York State agreed to a) let residential and business basic phone customers fund FiOS - illegally, and b) raised rates because of losses. (New York State Department of Public Service, June 2009)

a) "We are always concerned about the impacts on ratepayers of any rate increase, especially in times of economic stress," said Commission Chairman Garry Brown. "Nevertheless, there are certain increases in Verizon's costs that have to be recognized. This is especially important given the magnitude of the company's capital investment program, including its massive deployment of fiber optics in New York."
b) "Verizon's financial condition is 'relevant' when the Commission considers pricing changes because "the state has an interest in a viable company....There seems to be little question that the company is in need of financial relief; Verizon reported an overall intrastate return of a negative 4.89% in 2006 and its reported intrastate return on common equity was a negative 73.6%."

The disconnect? FiOS revenues and other services are not included because of a shell game played - only regular POTs phone lines are being counted, not the services over the wires, which can include everything from calling features to lines that have been upgraded to FiOS and all of its revenues.

7) Access Lines Declines? Most AT&T and Verizon Lines Aren't Being Counted.

a) AT&T's Statements about 'Access Lines' are Deceptive - Doesn't include U-Verse.

AT&T's U-Verse deployment is based on the old copper PSTN wires. They are simply reclassifying the lines ---i.e.; the PSTN is classified as telecommunications lines, but when U-Verse voice service is placed on the lines, then those lines are NOT counted as a line - as VOIP is reclassified as an 'information service'.

b) The Accounting of Lines Is Only Counting "Voice" Lines and Not All Other Lines.

AT&T's FCC Comments, National Broadband Plan

"Any such forward-looking policy must enable a shift in investment from the legacy PSTN to newly deployed broadband infrastructure. While broadband usage - and the importance of broadband to Americans' lives - is growing every day, the business model for legacy phone services is in a death spiral. Revenues from POTS are plummeting as customers cut their landlines."

As the above quote shows, 'broadband lines' and revenues are different than 'land lines' or POTs", regular phone calling. This deceptive slight of hand then lowers the land line accounting and their claim of the 'death spiral and revenues 'plummeting" is created because all of the other revenues, as we discussed, are going into a different financial bucket - even though in AT&T's case, the U-Verse lines are the old copper PSTN wires.

Customers paid for all lines to be upgraded, and therefore any 'upgrades' are nothing more than PSTN upgrades which were supposed to happen over the last 20 years. Just follow the money.

c) "Non-Switched" Lines, the Majority of Access Lines, ARE NOT COUNTED.

There are at least two types of lines that are part of the PSTN and have been in service since the 1980's - "Switched" and "Non-Switched". Non-switched, also called "special access" are data lines that include everything from alarm circuits to DSL or FiOS.

2012-12-28-Switchednonswitched.png

The FCC stopped requiring any break outs of total lines as of 2007. The last published data showed that non-switched lines had become the majority of access lines in the US--and in the previous quote, these lines ARE NOT counted in the 'line losses'.

There are also "information service" lines, which, besides VOIP, are the old PSTN lines that have been reclassified. According to numerous sources, once an information service, such as DSL is combined with a telecommunications service, such as a POTS line, then the entire line is reclassified.

D) The Regulators Failed America.

There is no data about these not-counted lines, even though they are part of the PSTN. The FCC failed to bother with truthful accounting, AT&T's SEC filings stopped giving any data on these lines and the data is not being collected by the state commissions - but AT&T wants you to 'trust them'. (The data may exist but is not public According to various regulators, it is not even being collected.)

8) Wireless Only? -- The Numbers Are also Cooked.

The wireless only statistics currently being promulgated come from the Center for Disease Control and are being used to claim there are major line losses via wireless substitution. We do not argue that customers have been dropping phone lines for wireless service. However, the latest statistic, that 36% of residential households are 'wireless only - is simply made up when it used as a picture of PSTN lines or the reason to close down the PSTN.

The problems with these statistics?

  • The CDC does not include business customers, which includes 'work at home' businesses or small businesses or even large businesses.
  • The CDC does not count the wires so it leaves out the basic question - "Do you have a cable or broadband or Internet service that uses a wire?"
  • It is impossible to determine from the CDC numbers whether they are counting any "VOIP" service, such as Skype over a broadband connection. Notes from their survey claim that they are addressing residential "land-lines".

There is no source of data that takes these missing items into account.

9) VoIP Scam (Voice over the Internet Protocol)

The closing down of the PSTN is being done with the claim that VoIP services are the future. However,

  • VOIP can not be used without a broadband connection. According to Magic Jack, the service requires at least 120 Kbps as an 'upload speed' to sound good. How does shutting off half of the US and not upgrading those networks benefit these customers with the promise of VoIP?
  • VoIP is a phone service. VoIP is not the Internet. It is not broadband and it is not the wires, and yet they are closing down the wires, which handle other services besides voice, such as data services.
  • Internet Freedom from VOIP Taxes? AT&T et al have neglected to tell customers that this service currently has a plethora of taxes, fees and surcharges and mimics the current phone charges. Some are even made up. Moreover, these taxes, fees and surcharges were added because over the last decade, now-AT&T and Verizon hounded the regulators to make VoIP look like all other 'POTs' service. The original intent of VOIP was to act to go around traditional phone service and save money but that never happened because the companies took multiple actions to add all of the traditional fees so that it would NOT have the 'disruptive' attributes as to price.
  • Internet Freedom from VOIP? The plan underway is to close down the PSTN by reclasssifing all of the lines as an "information service", removing all telecommunications obligations. This includes carrier of last resort, i.e., that the phone utility company will no longer have obligations to supply service, or remove"common carriage", which means that a company could now block, degrade or examine the traffic going over the wire.

Conclusion:

Have you been fooled? Believe AT&T, Verizon et al at your peril. Feeling foolish won't stop the closing of the PSTN.