VOIP: Affordable phone service, consumer protection, and universal service are at stake as Internet phone service ("VoIP" or "Voice over Internet Protocol") emerges as an alternative to traditional phones.
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November 17, 2004
The Michael Powell deregulatory juggernaut continues to roll along at the Federal Communications Commission, where regulations of telephone service at the state level were the latest victim. On 9 November, the FCC relieved digital telephone company Vonage of the need to adhere to state-based regulations that normally apply to traditional phone companies. One of a number of companies that offer telephone service over the Internet (using a technology know as VoIP, or Voice over Internet Protocol), Vonage had petitioned the FCC for federal preemption from regulations imposed by the Minnesota Public Utilities Commission (much as Pulver.com's Free World Dial-Up service and AT&T's Phone-to-Phone IP Telephony Service had sought and received such protection in the recent past). Once again, the FCC ruled that VoIP is an interstate rather than an intrastate service, and thus beyond the reach of state regulation.
"Our decision …," declared the FCC, "will permit the industry participants and our colleagues at the state commissions to direct their resources toward helping us answer the questions that remain after today's Order--questions regarding the regulatory obligations of providers of IP-enabled services. We plan to address these questions in our IP-Enabled Services Proceeding in a manner that fulfills Congress's directions 'to promote the continued development of the Internet' and to 'encourage the deployment' of advanced telecommunications capabilities. Meanwhile, this Order clears the way for increased investment and innovation in services like Vonage's to the benefit of American consumers."
Ever sensitive to Wall Street's demand for "increased investment," Powell's FCC has now issued a series of decisions designed to please its corporate petitioners. But while this latest ruling is ostensibly concerned with digital phone service, the decision actually has a potentially much broader impact. Especially in light of the trend to shift increasing amounts of voice and video traffic to the Internet, the FCC's upcoming IP-Enabled Services proceeding will have enormous consequences for the future of media and telecommunications in the US.
Looming on the horizon, for example, is a major push by DSL providers Verizon and SBC (no longer content in their role as also-rans in the high-speed Internet sweepstakes), to challenge the broadband market currently dominated by the cable industry, which holds a nearly 2-to-1 lead in the residential service. Both Baby Bells have announced ambitious plans for fiber-based networks (fiber-to-the-premise service, or FTTP, for Verizon, while SBC plans call for more economical fiber-to-the-node service that reaches neighborhoods rather than individual homes with fiber). Both systems will vie with cable companies for bundled voice/video/data supremacy, and even SBC's less expansive Project Lightspeed promises some impressive specifications: 20-25 megabits of bandwidth per home, allowing the company to deliver four channels of switched video to four different TVs in the home, video-on-demand, digital video recorders, interactivity, 6-mbps high-speed data delivery, and telephone service.
Traditionally, such multichannel video service would be subject to municipal franchise regulations, the vital quid pro quo that grants cities the right to receive compensation (including public-, education-, and government-access channels and the 5 percent franchise fees to pay for such programming) in exchange for a cable operators' use of the public rights-of-way necessary to build and maintain their local monopolies. But the Baby Bells have already started lobbying for exemption from such franchise requirements for their upcoming fiber/DSL-based video services, and Powell may already be laying the groundwork that will allow him to grant the Bell's wishes next year. Tucked away on page 21 of the FCC's 41-page Vonage decision is a telling phrase that potentially opens the door to such deregulation, a single reference suggesting that "even video" might be included among the "… other types of IP-enabled services having basic characteristics similar to DigitalVoice [that] would likewise preclude state regulation."
And if IP-based video joins voice in Powell's deregulated, market-driven digital enterprise zone, can cable be far behind? Comcast, Cox, and Time Warner Cable already have plans for a Next Generation Network Architecture (PDF) based on digital IP rather than analog video technologies, and as Comcast CEO Brian Robert told telephone industry executives at the US Telecom Association annual conference in October, the stage is set for convergence in the often hostile telecom lobby as well. "All of us who invest in competitive facilities need to stand together," declared Roberts, calling for opposition to those "who want the government to tell us how to do our business in this competitive marketplace." In the past, Roberts noted, "Some in the telephone industry seemed intent on making the case for telephone deregulation by disparaging cable, and to me this made no sense," urging telephone executives instead "to use our energies not to pit government against each other, but toward a rational, deregulatory telecommunications policy that benefits all of us."
If this kind of modems-to-plowshares partnership of former foes is music to Chairman Powell's ears, we can be thankful for the presence of Michael Copps and the recently re-nominated Jonathan Adelstein on the FCC, both of whom, even in concurring with the three-Republican majority in the Vonage case, underscored the limits of that decision--and of Powell's deregulation-at-all-costs approach. The Vonage decision, as Copps observed,
finds that VoIP services like Vonage's DigitalVoice have an undeniably interstate character. That's fine as far as it goes—but it doesn't go very far. Proclaiming the service "interstate" does not mean that everything magically falls into place, the curtains are raised, the technology is liberated, and all questions are answered. There are, in fact, difficult and urgent questions flowing from our jurisdictional conclusion and they are no closer to an answer after we act today than they were before we walked in here. So rather than sailing boldly into a revolutionary new Voice Over communications era, we are, I think, still lying at anchor. By not supplying answers, we are clouding the future of new technology that has the power to carry us over the horizon.
So I can only concur in today's decision. While I agree that traditional jurisdictional boundaries are eroding in our new Internet-centric world, we need a clear and comprehensive framework for addressing this new reality. Instead the Commission moves bit-by-bit through individual company petitions, in effect checking off business plans as they walk through the door. This is not the way we should be proceeding. We need a framework for all carriers and all services, not a stream of incremental decisions based on the needs of individual companies. We need a framework to explain the consequences for homeland security, public safety and 911. We need a framework for consumer protection. We need a framework to address intercarrier compensation, state and federal universal service, and the impact on rural America. But all I see coming out of this particular decision is . . . more questions.
For better or worse, many of those questions will be answered in the FCC's IP-Enabled Services proceeding next year.