On Thursday, the Federal Communications Commission voted unanimously to begin the orderly shutdown of the old wireline telephone network.
The time has certainly come. Americans are rushing to cut the cord to the once-ubiquitous analog network in favor of better and cheaper Internet-based voice services from providers large and small.
That’s the kind of innovation Accenture’s Paul Nunes and I call a “Big Bang Disruptor,” so named because of its devastating impact on a once-dominant technology and the businesses that offered it. In 2003, more than 90 percent of U.S. homes had a wireline connection. Today, it’s 26 percent. Bang!
The old network, required as a matter of law to continue operating, is now an expensive white elephant. Once invaluable assets have quickly becoming liabilities, pulling the wireline phone business into an economic black hole. If nothing else, the eventual transition to all-IP voice services for all Americans — perhaps by the end of the decade — will end the waste of maintaining worse and more expensive analog technologies, freeing up private capital better used for improvements to their digital replacements, wired and wireless.
But there’s a more urgent reason to encourage and accelerate the so-called IP transition. Doing so will definitively close what’s left of the “digital divide” that separates those enjoying the benefits of broadband Internet from those who don’t.
Who are the Internet have-nots? The answer may surprise you. According to the Pew Internet Project, nearly half of the 15 percent of American adults who don’t use the Internet are 65 or older. (Other factors, including sex, race, income and geographic location are less significant, and continue to decline.)
That number lines up nearly perfectly with the percentage of older Americans — between 10 percent and 20 percent of them — who, according to numbers reported by AARP, still rely exclusively on the analog phone network.
The eventual shutdown of the phone network, in other words, will close the digital divide for older Americans, at least for voice. And once the holdouts have gotten over their understandable resistance to better and cheaper new technology, helping them appreciate the value of the rest of the Internet — in health care, in continuing education, in home automation, in social, public safety, energy and entertainment services, among others — will be that much easier.
It is also essential. According to the Pew survey, the most frequent answer given by non-users as their primary reason not to connect is that the Internet is “just not relevant to them.” The next-biggest factor is usability. The problem, in other words, isn’t availability or cost. They simply don’t believe there’s anything online for them. And they lack the ability to discover otherwise.
Last year, in testimony before the Senate Commerce Committee, I argued that these findings offer the most compelling reason of all to transition the dwindling number of wireline users to the Internet as quickly as possible.
While critics of the proposed shutdown (largely local and rural phone companies) warned of the risk of leaving behind the dwindling number of households that still rely solely on the analog network, the reality is precisely the opposite.
Getting the last 25 percent of predominately older Americans exclusively onto IP networks sooner rather than later will make it easier and less expensive for them to connect to other broadband services, including video, email and Web access. Which, thanks to the economic magic known as network effects, means a more diverse, valuable and robust online experience for everyone.
To be sure, there remain tricky engineering and business issues to be resolved, including emergency services and the incompatibility of older analog devices (some fax machines and phone-activated security gates, for example) that weren’t designed to work on digital networks.
That’s why the FCC is wise to begin the process with voluntary consumer trials in specific geographic markets. The trials will surface the remaining issues, including regulatory roadblocks and consumer education, which will need to be solved before a full transition can be scheduled.
But time is of the essence. Before Thursday’s order, the FCC had been considering the trials for over a year. In the meantime, the pace of consumer defection from the old network has accelerated. It’s becoming increasingly difficult and expensive to maintain last century’s technology.
The 2009 shutdown of analog broadcast television in favor of its digital disruptor offers important lessons the FCC would be wise to heed. After only four years of planning, broadcasters managed to complete the transition, but still lost most of their remaining market share to cable, satellite and, increasingly, better and cheaper Internet-based video services. Many stations have found it difficult to use new digital platforms to compete effectively. As over-the-air broadcasters start to throw in the towel, consumers lose local content and competition suffers.
For engineers, consumers and regulators alike, nothing motivates like a deadline. So, in the inevitable shift to all-digital voice services, the best way to finish what customers have already started is to set an aggressive target date and stick to it.
In the short term, that may unsettle some older Americans. But more quickly than anyone can imagine, they’ll get over it and enrich our lives by bringing their absent voices to the digital conversation.
Larry Downes is co-author, with Paul Nunes, of “Big Bang Disruption: Strategy in the Age of Devastating Innovation” (Portfolio 2014). Reach him @larrydownes.
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