Among the findings of the report:

• In December of 2009, there were 127 million traditional switched access lines in service and 26 million interconnected VoIP subscriptions in the United States, or 153 million wireline retail local telephone service connections in total.  Of these, 91 million were residential connections and 62 million were business connections.
• Interconnected VoIP subscriptions increased by 22% during 2009 (from 21 million to 26 million subscriptions) and switched access lines decreased by 10% (from 141 million to 127 million lines) for a combined annual decrease of 6% (from 162 million to 153 million total wireline retail local telephone service connections).
• Of the 153 million total connections in service at year-end 2009, 45% were residential switched access lines, 38% were business switched access lines, 15% were residential interconnected VoIP subscriptions, and 2% were business interconnected VoIP subscriptions.
• 84% of interconnected VoIP subscribers in December 2009 received service through a broadband bundle.
• 87% of these bundles were provided over cable modem; 13% via fiber to the premises (FTTP), DSL, or other wireline; less than 1% via fixed wireless or other connections.

The way that the FCC defined Interconnected VoIP service includes both companies like Vonage as well as cable and telephone companies that own their own networks. It’s important to note that all these voice services are different from circuit-switched telephone service, but are not all the same.

The IP data packets used by services like that of Vonage travel over the public Internet. Facilities-based cable offerings, in contrast, transport IP data packets over their private managed IP networks with end-to-end guaranteed quality of service (while still interconnecting with the public switched telephone network as necessary).

Over the last decade cable operators have shown tremendous growth in their voices services (see this chart), now serving  more than 23.5 million phone customers. Cable currently provides phone service to one in every four wireline phone households in the U.S.

As a result of this competition, consumers have seen savings in their bills. According to a study a few years ago by Microeconomic Consulting & Research Associates Inc. (MiCRA), consumers and small businesses across the country could save a total of $111 billion on their phone bills by 2012 as a result of competition. MiCRA estimated that residential consumers could save an average of $144 or more each year, while small businesses could save 50-70% on their phone bills – nearly $500 each year on average.

NCTA agrees with many of the points raised by AT&T.  For instance, it is true that many of the rules created for the PSTN, designed to address a monopolistic environment, are arcane and badly in need of updating.  Nowhere is this more true than in the case of the intercarrier compensation regime, a complex set of regulations governing the payments companies make to each other to get a voice call from Point A to Point B.  It’s no secret that these rules are badly in need of repair – the FCC has been grappling with their reform for nearly a decade.  Given the challenges of applying these rules to modern networks, many in the industry agree that the Commission should consider eliminating these rules entirely, allowing entities to recover the costs of their networks from their customers, and handing traffic to other carriers who do the same.

But  AT&T’s premise breaks down (to continue the automotive analogy) when it suggests that problems applying existing compensation rules to voice services provided over IP networks (VoIP) somehow lead to the conclusion that there is no need to apply any rules to VoIP, and in particular no need for interconnection rules.  Although the telecommunications industry looks very different than it did when the PSTN was created, the Commission already has concluded that a number of key requirements, like E-911 and universal service fund contributions, should apply to voice services even when those services are provided over IP networks.

The Commission also is keenly aware that the ability to interconnect and exchange traffic with incumbent local exchange carriers (ILECs) is the cornerstone of a competitive voice market and that without some form of regulatory supervision, ILECs would  have the ability to deny interconnection to competitors.  For instance, while Mr. Hultquist sings the praises of IP networks in his blog post, his company has argued that it has no legal obligation to interconnect its IP network with the IP networks of its competitors or to exchange traffic with those competitors in IP format.  Because AT&T is by far the largest provider of voice service with nearly 140 million total voice lines (six times more than the entire cable industry), this is a matter of great concern.

Furthermore, to facilities-based providers of VoIP services, voice is not just another data application riding over an IP network.  Both cable operators and telephone companies, including AT&T, offer VoIP as a specialized service, separate from their broadband Internet access services offered to consumers.  VoIP packets are separated from other broadband traffic to ensure the quality of service necessary to keep calls from breaking up or dropping.  Without the ability to interconnect with incumbent networks, cable operators and other competitive VoIP providers would be unable to offer these voice services, which have generated billions of dollars in savings for consumers.

So, while it would be nice to be in a world where all VoIP providers could readily interconnect their IP networks, for now, some minimal rules of the road are required to ensure that the technology can reach its full potential.

The good news is that some cable operators receive high marks from consumers about the service they receive. While some cable companies are not viewed positively, there seems to be a general air against incumbents. In other words, when it comes to video service, the incumbent cable providers are not viewed as positively as newer competitors; however, when it comes to telephone service, cable is viewed more positively than traditional phone providers.

In addition, Consumer Reports’ reader survey points out something that’s been known for some time: Customers who take bundled service are happier with their provider. Since cable first rolled out Internet access and then telephone service – as well as services such as DVRs, HD and digital cable – we have seen the take rates increase dramatically for the new services. Consumers are getting more out of their cable subscriptions, and by bundling Internet access and phone with their video service, they’ve also been able to see savings.

Now for a few factual problems…

The article lumps together the services provided by the phone companies (AT&T’s U-verse & Verizon’s FiOS) as “fiber-optic service.” In fact, while Verizon has widely deployed fiber, AT&T is still using twisted copper pair. You may recall that cable has a hybrid fiber-coaxial infrastructure.

A sidebar of the costs of TV service completely bungles its analysis of the impact of CableCARDs, but more distressingly, the article gets its description of E911 wrong.

Emergency 911 service varies among technologies. Fiber phone service uses the same long-proven location system as a landline phone. New cable-phone and other VoIP 911 services are less universally dependable.

The section on emergency phone use seems to confuse cable’s phone service, which transports your call over cable companies’ privately managed IP networks, with VoIP services such as Vonage, which use the public Internet for transport. The concern is that when a customer calls into a 911 operator, emergency responders should be able to know where the household is located – and that in the case of VoIP calls transport entirely over the public Internet, that may not be possible. Cable operators do not have this problem. As the article notes, phone service from cable or U-verse/FiOS may need to instead rely on a cell phone in the case of a power outage.

In a section on Internet speeds, the article argues that only 1 Mbps is necessary for most customers. That’s not a problem for cable customers, since the average standard speed typically exceeds 5 Mbps, but it seems a little silly to argue that very high speeds, such as cable is offering now through the DOCSIS 3.0 standard, are mostly a “marketing game.” Certainly, not everyone needs 50 to 105 Mbps, but I think 1 Mbps is hardly adequate these days.

I also found it telling that they buried the cord-cutting strategies at the back of the article. You can just rely on an antennae and over-the-air broadcast television, but if you have reception issues, then you’ll be out of luck. You can turn to the Internet, but content is limited there as well, and you’ll still need to subscribe to an Internet connection.

In the end, it seems like consumers are being serviced quite well by today’s vibrantly competitive marketplace.

The phone company maintains custody of the number you own. When Verizon gets a request to terminate service and transfer your number, they have four days in which they must comply.  This is known as the porting interval.  Our argument then, as now, was simple.  Verizon has every right to offer its customers whatever package it sees fit to offer 361 days out of the year.  They should not, however, be allowed to use advance notice of customer defection as leverage against their competitors.

The FCC agreed, and found that Verizon had been improperly using the porting interval for the purposes of retention marketing.  Verizon, unhappy with the FCC’s decision, filed suit in the US Court of Appeals for the DC Circuit in an attempt to get the FCC decision overturned.

Today, the court reaffirmed the FCC decision that Verizon was violating federal privacy rights by illegally using the number porting window for last gasp offers.

The ruling is a boost for consumers who are already saving billions of dollars each year because they have switched to cable’s digital phone service.

Once you have decided to leave a provider, they should not impede your ability to do so.  This decision is good for competition and will ensure consumers can change local telephone providers without undue harassment by the incumbent provider. NCTA also favors reducing the porting interval to two days to further expedite consumer requests.

For our part, we look forward to the continued competition for your telephone business.

Recently JD Power and Associates released their annual rankings of customer satisfaction with both local and long distance telephone service.  The rankings measure five factors to determine overall satisfaction.

• Customer service
• Performance and reliability
• Cost of service
• Billing
• Offerings and promotions

For the the second year, cable companies won all four regions. The latest study proves what we’ve said for some time – cable is your best value for telephone service. You can learn more about cable telephony here.

Due to the relatively unprecedented nature of this direct, and public, debate between major industry players, a lot of people took notice.

Sidecut Reports called it a tussle that only telecom policy wonks could love.

Maybe it’s a tussle that only telecom policy wonks could love, but if you are at all involved in the regulatory sphere you’ve just got to love that the battle of the corporate titans has now moved, Web 2.0 style, into the blogosphere, with Verizon and the Cable companies now using blogs to take pokes at each other…  If you are really interested in the argument, follow the links and join the conversation. We are going to spend the rest of the day worrying whether or not direct competitor blogging means that pundits are out of a job — again!

From the Technology Liberation Front:

Verizon’s Tom Tauke and NCTA’s Kyle McSlarrow take to fisticuffs in their comments (well worth reading and remarkably… candid) on the Verizon Policy Blog after Tom asked “Will Cable and FCC Thwart Consumer Choice?”

Dave Zatz at Zatz Not Funny writes:

In the talking typing heads policy battle currently raging across the blogosphere, I hereby declare the NCTA as winner. I actually have very little interest or knowledge of the topic at hand, however there can be only one… and Verizon’s lobbyist is still ending sentences with two spaces, while Cable’s lobbyist linked his rival’s blog. (Bonus 1/2 point to Cable for using WordPress, though they haven’t upgraded to 2.5.* yet.)

Perhaps the most salient point, and possibly the briefest, was made by Insight Communications CEO (and NCTA Executive Committee Member) Michael Willner (a blogger himself) after Tom and Kyle suggested taking the debate offline.

NO! Resist going back to the old Washington ways!! Don’t settle this in a beltway gin mill. This is the 21st Century and we all want a front row seat!!

We wouldn’t consider it.  When Kyle launched this blog, he spelled out its purpose clearly.

But we didn’t start this blog just to tell you all that. We launched this blog to talk about telecom policy. Today’s vibrant public policy discussions are driven by conversation and debate taking place online, so we hope this blog will contribute to that dialogue. We’ll be talking about proposed legislation and regulation at the federal, state, and local level. We’ll voice our support for changes that would lead to a better, more competitive technology landscape. When we think legislation is unnecessary or detrimental, we’ll talk about that, too. And, while we will certainly express our views, our goal is to have a dialogue… So, we’ll… invite people with whom we may not agree to engage in debates across their blogs and ours. We’re looking to cross post ongoing exchanges in an effort to provide you with the kind of information that helps you decide for yourself.

This was obviously an example of that, but this is only one salvo in a much broader and ongoing discussion and debate over telecom issues.  Keep your eyes peeled, there’s more to come.

(On two sidenotes, you can find NCTA’s statement on the FCC Decision here.  A sidenote to Dave Zatz: We’re big fans of WordPress, but haven’t upgraded due to a dependency on one plug-in that hasn’t yet upgraded.  Hopefully we’ll find a 2.5 compatible plug-in soon.  I’m working on it.)

With the five largest cable operators having reported results for the first quarter of 2008, there are now 16.2 million customers receiving phone service from the cable industry…

…and counting.

This is incredible growth if you look back over the past decade.

Digital Phone

Consumers now have access to more competition than ever thanks to cable. Digital telephone service provides consumers with a true alternative to standard telephone service. While some cable operators have offered traditional circuit-switched telephone service for years, most are now offering digital phone service. This service often comes as part of a “bundle” where multichannel video, high-speed Internet and voice services are offered as a package and billed in a single invoice, providing a better value and more simplicity for customers.Through the use of software, digital phone service provides all the functionality of the public switched telephone network (PSTN), while making possible new features not available through traditional telephone service, such as Web portals that allows customers to review their calling history or listen to voicemail messages online when away from home. Digital phone service is a revolutionary technology that has the potential to completely change how phone calls are made and how voice services are used.

More Video Choices

Cable’s digital video services generally include hundreds of channels, high definition TV (HDTV), Video-on-Demand (VOD), Digital Video Recorders (DVRs), Interactive Program Guides (IPGs), Enhanced TV services (ETV, including web access), and commercial free, CD-quality music channels. Cable companies are aggressively deploying HDTV nationwide. By March 2007, 100 million U.S. television households were passed by at least one cable system offering HDTV service, which represents all of the top 100 designated market areas (DMAs). Of all DMAs, a total of 209 markets (out of 210) were served by at least one cable system that offers high-definition programming. Local cable systems also were carrying the digital signal of 999 unique broadcast stations in March 2007, nine-and-a-half times the amount in January 2003, when 92 such stations were carried, and national cable program networks currently offer 66 channels in high definition.

Lightning Fast Internet

Cable’s hybrid fiber-coaxial infrastructure provides 35.6 million cable modem customers with high-speed access to the Internet. With downloads speeds reaching up to 50 Mbps, cable’s broadband can’t be touched by the telco’s DSL offering and other services from the phone companies are only available in very limited areas. The cable industry also has developed standards to make interoperable, nonproprietary cable modems available through retail stores.

Competition Works. Consumers Win.

Competition has provided consumers with more choice, and more savings. Cable competes every day for voice, video and broadband customers. We take the competitive marketplace seriously which explains why we have the most video customers, the most broadband customers, are adding millions of voice customers every year, and in 2007 lead the J.D. Power and Associates customer satisfaction rankings for telephone services in all six US regions.

Because cable competes, you win.

A couple years ago, NCTA created a video to explain cable’s impact on America. Take a look and skip ahead about two minutes in. That image of the phone industry as stodgy is amusing because it was so true. Rotary dials, touch-tone, mobile phones – the pace of these innovations was pretty slow.

But today, consumers are finally enjoying true facilities based competition in local phone service. Cable’s service is reliable plus it offers many of the standard features for a great price. Generally, you get unlimited calls anywhere in the U.S., Canada and Puerto Rico. You get to keep your current home phones, wall jacks and phone number. Many operators include services like Call Waiting, Caller ID, Call Forwarding, Speed Dial, and so on. But you also see features like digital voicemail that can be accessed over the Internet from any location, and new features like Caller ID on the TV are beginning to be introduced in some communities.

How does cable’s digital phone service work?

Cable’s phone service relies on new technology, different from traditional circuit-switched telephone service that uses 100-year old copper wires. Cable’s voice calls are traveling over the same fiber optic lines on your local cable system that are also carrying digital video, high-speed Internet and other services.

Through the use of software, calls from a cable phone household are placed over an IP-based data network and voice is transmitted with data “packets.” You may have heard of some VoIP (Voice over Internet Protocol) phone services before, but their IP data packets travel over the public Internet. Cable phone providers are sometimes referred to as being “facilities-based,” since they move IP data packets over their private managed IP networks, offering end-to-end quality of service monitoring, while still interconnecting with the PSTN as necessary.

Bottom line: Consumers have a lot more choices today when it comes to talking to friends and family over the phone. Cable’s phone offering offers a great option for people looking for both useful features and savings.

In fact, in the past four years, consumers that have switched to cable phone service have already saved $23 billion. Evidence of that can be found in a study by Microeconomic Consulting & Research Associates, Inc. (MiCRA). The report, “Consumer Benefits from Cable-Telco Competition,” was first prepared in 2006 and then updated in November of 2007.

According to MiCRA, consumers and small businesses across the country have already saved $23.5 billion and may save a total of $111 billion on their phone bills over the next five years as a result of robust competition. MiCRA estimates that residential consumers could save an average of $144 or more each year, while small businesses could save 50-70% on their phone bills – although the projections conservatively assumed that small businesses would save about $240 each year.

And the power of the bundle shouldn’t be forgotten. Think of what you used to pay separately for multichannel video service, Internet access, and local & long distance phone service, and the total was probably approaching $200 per month. Well, if you get all these services from your local cable operator, you can realize great savings and have the convenience of one monthly bill.