Tuesday, December 2, 2003 - The Progress & Freedom Foundation Blog

Why Regulate VoIP?

Today's FCC VoIP forum raised three rationales for regulating VoIP: First, to stop arbitrage because internet protocol voice calls currently avoid access charges that other voice calls pay; second, to ensure public safety through access to E-911 services and law enforcement access through CALEA (Communications Assistance for Law Enforcement Act); and, third, to support universal service obligations. Commissioner Adelstein's statement best summarized these regulatory concerns. Indeed, the Commissioner's statement most plainly sets forth the incipient rationales for regulating VoIP as a "telecommunications service," as opposed to a relatively unregulated "information service."

The first and third rationales are one in the same. Namely, VoIP needs to be regulated to preserve the current cross-subsidy system that exists through above-cost access charges. Indeed, it is true that part of the impetus for VoIP rollout right now is access charge avoidance. These rationales, however, are unsustainable in the long-term as voice migrates en masse to a packetized world where distinguishing a voice packet from a data packet is infeasible. Thus, this rationale for economic regulation is best viewed as a last gasp of the old universal service system. [Mind you, these last gasps can last for quite a while.]

The public safety rationale is also problematic from a consumer sovereignty viewpoint. If I as a consumer want a cheap, tencho-cool way to make voice communications without E-911, and I know it, so what? Admittedly, as the service becomes more ubiquitous, the social cost of not having an E-911 mandate may exceed the private benefit from not having to pay for such a mandate. But that day is some time off. Better to follow the advice of Jeff Pulver and let the market and voluntary, private standard setting bodies work on the E-911 development -- as well as try to answer the question about the true social cost of not having a E-911 mandate and comparing to the cost of such a mandate.

The CALEA issue is more difficult to resolve. While we want to encourage new, low cost technological innovations like VoIP, we do not correspondingly want inadvertently to create a communications platform immune from law enforcement scrutiny. [The premise of this statement is of course debatable, but let's work with it for now.] That said, the CALEA issues surrounding VoIP are merely a subset of CALEA-like issues surrounding the Internet as a whole. These issues need to be worked out, but not by the FCC or state regulators.

My ultimate takeaway from the forum is that there is no rationale for regulation of VoIP by state or federal economic, administrative regulators. Given the technological "catch me if you can" problems that VoIP ultimately introduces, regulators' attention will be better spent toward resolving the crises that VoIP will precipitate in universal service cross-subsidies. I think Florida Commissioner Chuck Davidson hit the issue right on in counseling forbearance and retreat by the FCC and the states, a view echoed by the Chairman in a speech days earlier.

posted by Ray Gifford @ 2:01 AM | General