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Tuesday, November 18, 2003

Filling the VoIP Regulatory Vacuum
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The U.S. District Court for the District of Minnesota's preliminary injunction against the Minnesota PUC preserves the current unregulation of VoIP. Qwest Communications has rushed into this void by announcing it will begin to offer VoIP services in Minnesota and Arizona. This move aligns Qwest with Verizon, SBC, Vonage and AT&T, among others, in the tug-of-war over VoIP's regulatory status as an "information service" or a "telecommunications service."

The import of this move, though, is that it will create greater reliance interests upon VoIP as an unregulated de facto information service. Thus, VoIP will gain a foothold as a lower-cost, untaxed service. Consumers will come to rely on this. The onus then will be on regulators -- particularly state regulators -- to "change" VoIP's regulatory status and hence raise its costs with the imposition of taxes, access charges, universal service and public safety obligations. This is much harder to do once consumers are used to cheaper, unregulated service. If VoIP gains a market foothold, it will then be regulators who are blamed for raising the costs -- something regulators will be loath to do.

The broader and obvious point to be made here: regulatory action does not take place in a vacuum, but responds to outside incentives. Given the broad discretion afforded to regulatory decision-makers, those external influences will often be dispositive in legal classification.

Please note: I am not opining here on the district court's legal analysis. Likewise, I offer no opinion about VoIP's status under state law. Indeed, I think under certain state law definitions of telecommunications, VoIP probably qualifies as a regulated service. Hence the urgency for: 1) the FCC to fill the void and rule; and, 2) for VoIP technologies to be used by carriers such that the reliance interests become overwhelmingly stacked in favor of unregulation.

posted by Ray Gifford @ 9:44 AM | General

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