Friday, February 13, 2004 - The Progress & Freedom Foundation Blog

The Regulators' Dilemma

Yesterday's FCC ruling that's FWD is an interstate information service is a good first step, but it also was the easiest one to take (this coming with a 3-2 vote, no less!). While Chairman Powell has shown great leadership in pushing the issue to the forefront, states may be tempted to fill the regulatory void before the FCC's newly initiated VoIP proceeding concludes.

California is one of those states. On Wednesday, the CPUC asserted jurisdiction in order to determine the "extent of regulation on VoIP carriers," including intercarrier compensation, universal service, and public safety.

You might also try to assert jurisdiction over Atlantis while you're at it. With the FCC's decision, "computer-to-computer" VoIP applications such as, Skype and who knows what will be free from the economic regulations traditionally imposed on common carriers.

Imposing heavy-handed regulations at the state level (assuming they are not preempted) will only cause the technological end-run to progress farther toward the edges of the network. To the extent that states are "successful" in regulating VoIP providers (likely those residing at the physical layer), regulations would only cause companies to shift their VoIP services toward greener c-to-c pastures. Furthermore, there will be spillover costs to other states and their consumers. See Doug Sicker's paper for the full details.

Covad's Jason Oxman pointed me to an article in Wednesday's Wall Street Journal which helps to illustrate this point. The article describes how manufacturers now include expiration dates on bottled water that purportedly has a shelf life of one or two years. The Department of Homeland Security and the Red Cross advise people to replace stored water before it expires.

But bottled water, according to the FDA and human reasoning, never goes bad. So why the expiration dates? Because New Jersey, for no reason the article's author could discern, requires them. And since it's easier and more cost-efficient for manufacturers to comply with the New Jersey law, they label every bottle.

Instead of jumping the gun on VoIP (because, despite all the hype, there is time to properly sort out the multifarious public safety and law enforcement issues), states should tackle those well-known but politically inexpedient issues in order to set the proper conditions for the coming VoIP age: rate rebalancing, universal service and access reform.

posted by @ 1:18 AM | General