NRRI 16-01 Product Substitution

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The technology transition is well underway. Customers are not waiting for the FCC or State commissions to designate functionally equivalent services but are moving from the traditional Public Switched Network (PSTN) and time division multiplexed (TDM) products to new services made possible by changes to network infrastructure at a rapid rate. Based on their adoption of new services, these customers appear to see few differences between the traditional wired copper network and the new IP and wireless networks.
Switched voice circuits continue to decline year over year, as VoIP connections and customers cutting the cord altogether increase, bringing us closer to the "tipping point" where the investment in traditional service may not support its few remaining customers. As of December 31, 2013, the FCC's Local Telephone Competition report showed that approximately 28% of residential consumers had already moved from traditional Time Division Multiplexed (TDM) voice service to VoIP products, primarily cable.1 The December 2015 CDC wireless substitution statistics show that 46.7% of adults have "cut the cord" entirely and use only wireless voice service,2 leaving fewer than 25% of residential consumers with traditional TDM voice service.
While for some, the transition is moving swiftly, there remain others who cannot or will not move for various reasons, including the need for specialized services not yet available via the new infrastructure or because they are located in parts of the country where broadband capable of supporting these new services has not yet reached, limiting customer choice to products that may not be adequate substitutes for their current service. As the transition moves forward, state regulators will need to identify these customers and determine how they may be supported until the infrastructure catches up with consumer needs. In the end, the ultimate success of the transition will turn on the ability of all parties (the States, the FCC, carriers, and consumers) to identify and, manage the transition to products that are adequate substitutes for traditional TDM wireline service, based on location-specific and customer-specific needs.
The FCC has proposed eight examination points to determine whether the substitute products/services available in a specific area are adequate replacements for traditional switched voice service. Because one size rarely if ever fits all, the States have also begun to consider how to identify functional substitutes for traditional TDM products. Two states (Michigan and Ohio) have begun to evaluate the needs of their own citizens. These states are addressing the question of how to identify replacement products, map them to customers, and determine where limitations on products and networks will require special intervention to ensure that telecommunications services (both voice and broadband) remain available to all, regardless of their location.

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