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Is Regulatory Creep Inevitable for VoIP?

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The threat of regulation, to one degree or another, often seems inevitable for the VoIP market. This wasn’t always the case. In the very early days of VoIP it seemed like the communications technology would remain independent of governmental interference, largely due to its net-based nature. Yet as VoIP use grew over the years, and as it became increasingly clear how big a player VoIP was going to be in the larger telecom market, the notion of regulation began to seem more and more inevitable and, to some people, more and more necessary to ensure the normal, everyday telecommunications technologies of the future continue provide reliable service and access to emergency services, to name just a few avenues of concern for VoIP users and potential regulators.

Why Wasn’t Regulation on the Table from the Beginning?

To a certain extent it seems natural to regulate VoIP, and it seems a little strange that VoIP wasn’t regulated from day one. After all, the major telecommunications companies were heavily regulated soon after from their inception in the late 1800’s when they gave birth to the nation’s PSTN systems.

Yet VoIP was a special exception due to the fact it’s web based, leaving governmental agencies wondering whether VoIP should be classified as an informational technology or a communications technology. VoIP has always looked and quacked like communications technology but its grounding in bits-and-bytes threw its seemingly natural communications classification into debate.

The distinction between information technology and communications technology is a big deal as this divide was written into law way back with the Telecommunications Act of 1996. Titles One and Two of the Act lay out different rules for how communication and information technologies can be regulated. Communication technologies need to be regulated just as thoroughly as the major telecom carrier, while information technologies are provided a far more “hands off” regulatory approach.

In light of this confusion regulators have been playing it safe and approaching VoIP with a “hands off” approach. This reluctance to regulate VoIP may have its roots in the telecom Act of 1996 but it also takes into account the very real fact that most people don’t want the Internet regulated at all, and any regulation of VoIP seemed like a slippery-slope towards regulating other aspects of the web. This fundamental public fear lies at the heart of the argument being made by certain large telecom companies as to why VoIP should continue to avoid regulation, even if their intentions may be a little more self-serving than net neutrality.

Abstract Arguments

While seemingly abstract the battle over regulating VoIP really does come down to how the technology is classified- whether it should be called a communications technology or an information technology. However some VoIP boosters argue the simple act of giving VoIP a firm classification will limit the technology’s potential for innovation. To these individuals and organizations classifying VoIP in one camp or the other will discourage the entry of new blood into the market, and if new start-ups and service providers decide to avoid the tricky world of VoIP altogether than the market will likely stagnate under the conservative approach of both currently successful VoIP companies and telecom providers who will simply want to cash in on VoIP’s proven formulas.

However, what these individuals and organizations are forgetting is the fact that VoIP is already regulated in quite a few ways. What started with one seemingly common-sense governmental mandates has grown to a small catalog of regulations which gave way to full-blown regulatory creep. Regardless of how VoIP gets officially classified, as an information technology or a communications technology, one thing is clear- VoIP is likely to continue to face increasing regulatory action over the next decade. But is this what’s best for the technology, or will it truly impede VoIP’s radical potential?

If VoIP has been a supposedly “hands off” market from day one then how did this technology come to adopt as many regulations as it currently operates under?

The answer to this question is unsurprising- VoIP was saddled with a couple of well meaning, common-sense regulations everyone could agree on, and those regulations opened the doors for regulatory creep to do its thing.

Getting the Ball Rolling

What was the first regulation that set up VoIP for creep? What one telecom mainstay convinced everyone (well enough) that VoIP should have at least a few bottom-line services it needs to perform?

Emergency connectivity.

While everyone rung their hands about whether VoIP was a communications technology or an information technology one thing was abundantly clear, and that was the fact VoIP was enough of a communications technology that it needed to comply with Federal 911 and E-911 requirements. Put simply, the Feds decided VoIP users needed to be able to reach emergency phone numbers just as readily and reliably as PSTN and mobile users.

As you can see this was a pretty easy win for regulators, especially as VoIP grew in popularity and the number of people using VoIP on a regular basis climbed upwards. But as you’d expect, regulatory creep began to do its work and toss VoIP under the umbrella of plenty of other seemingly similar common-sense regulations, including the following, all of which VoIP is currently subject to:

  • VoIP service providers need to educate their users on limitations within their emergency number services.
  • VoIP services need to pay FCC fees and contribute to the TRS and other similar funds.
  • VoIP services need to contribute to the Universal Service Fund (USF).
  • VoIP needs to comply with customer privacy and marketing restriction regulations.
  • VoIP needs to comply with Communications Assistance for Law Enforcement (CALEA).
  • VoIP need to offer Local Number Portability (LNP).
  • VoIP services need to be accessible to individuals with disabilities.
  • VoIP service providers need to comply with FCC market entry and market exit rules.
  • VoIP service providers are subject to fines and enforcement actions whenever they violate FCC regulations.
  • VoIP service providers are also (positively) entitled to interconnection and traffic exchange with incumbent local exchange carriers.

The above regulations that have creeped onto the VoIP market run the gamut from common-sense and largely unobtrusive to highly controversial. Unsurprisingly most of the controversial VoIP regulations tend to revolve around service fees, though the controversy surrounding these regulations tend to come more from VoIP service providers themselves and less from actual users.

So if regulatory creep has mostly manifested itself on the VoIP market through various fees and promises of standards of quality imposed on service providers than what’s the big deal? Why is the regulation of the VoIP industry such a concern if it isn’t directly impacting VoIP users in any obviously negative way?

This is a good question, one with a complicated answer. However it doesn’t take much more than a cursory glance over the history of the telecom industry to see one huge potential pitfall all this well-meaning, seemingly common-sense regulation may bring about. After the creation of a nation-wide uniform telephone industry telecommunications technology stagnated for about a hundred years. That’s right, from the birth of the telephone to the introduction of the internet the heavily regulated telecommunications market didn’t see one single game-changing technological advance. If we’re concerned about excess regulatory creep on the VoIP market, and if some individuals and organizations argue any regulation will stifle innovation, it’s due to this significant historical precedent.

It’s clear that some level of regulation is necessary for the VoIP industry to ensure a certain standard for service quality. But excess regulation may lead to an unfortunate circumstance where the technology isn’t allowed to advance in any noticeable way and where the existing telecom giants retain all their incumbent power. And that could be a real problem for the consumer. 

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