The FCC Reviews VoIP--and Splits the Baby

On Tuesday, tpfp previewed today's FCC meeting on voice over the Internet services. Here's what actually happened.

In general, the Commission retained its "hands off the Internet" policy. It confirmed that one particular VoIP offering (pulver.com) qualifies as an "information service" largely exempt from regulation. (Oddly, the FCC did not address a similar petition by AT&T, despite pressure from Billy Tauzin (R-La)--outgoing Chairman of the House Energy and Commerce Commission.) The agency also initiated a new proceeding to re-examine the appropriate regulatory treatment of VoIP and tentatively proposed "that Internet services should continue to be subject to minimal regulation." That's the good news.

Now the mixed news: the 3-2 vote was especially contentious and split on party lines (Democrat commissioners favoring increased oversight of VoIP; Republican commissioners preferring the unregulated status quo). The VoIP proposal won't be resolved until next year--beyond any change of Administration. This suggests "President Kerry's FCC" might not be "good for the Internet."

Moreover, the FCC's pro-market language doesn't square with its proposal. Rather, the Commission signaled VoIP providers should expect to pay more:

Mechanisms to implement important social objectives, such as public safety, emergency 911, law enforcement access, consumer protections and disability access, may change as communications migrate to Internet-enabled services.

Indeed, the FCC promised draft new rules applying wiretapping laws to VoIP networks.

Whenever your government cites "social objectives," watch your wallet. Even the Republican majority wants to straddle the issue: deregulatory in approach and tone, the FCC proposes to reaffirm Internet deregulation but force VoIP providers 1) to subsidize needed services (e.g., rural, 911 emergency access, hearing-impaired teletypes); 2) to pay for network changes needed for electronic surveillance; and, perhaps, 3) to compensate local exchange providers under the "access charge" regime.

Neither the first nor second proposal is unjust. Both probably are politically inevitable. The third proposal is the most controversial. Of course, VoIP providers will object to access charges--but VoIP providers are relatively new and tiny; most haven't yet bought a Congressman or Senator. The real battle is between local exchange carriers (such as Verizon) who want access charges and interexchange carriers (such as AT&T) which are migrating traffic to VoIP to avoid such charges). Both sorts of carriers employ scores of Washington lobbyists and have well-established relations on the Hill.

So the new FCC proceeding will resemble the fight between King Kong and Godzilla--fun to watch and nearly impossible to predict. Well, not completely impossible. Consumers probably will lose.