Sunday, January 11, 2004

CNET - Senator Wants VoIP to be Regulation-Free

This is just too important an initiative to ignore. The worst possible thing that could happen for the prospects of IP telephony would be for legislators to start suffocating it in its cradle with new regulations.

LAS VEGAS--U.S. Sen. John Sununu said he's preparing legislation to keep broadband telephone service providers from being "smothered by state and federal regulators."

The New Hampshire Republican described the proposed law at the Consumer Electronics Show that as a "clear, pre-emptive remedy" that directs state utility regulators to take a hands-off regulatory stance on what's called voice over Internet Protocol (VoIP). The legislation also seeks to make the Federal Communications Commission the main authority over VoIP service providers, the senator said.

As more conversations begin to flow through unregulated VoIP links instead of the heavily taxed public switched telephone network, state governments stand to lose billions of dollars. Because VoIP currently is not regulated, companies offering the service aren't subject to the vast thicket of taxes and regulations governing E911 and guaranteeing wiretapping access for police. Also at issue is the future of a special $2.25 billion-a-year tax--typically reflected in higher monthly phone bills--that provides schools and libraries with discounts on everything from Internet access to phone lines for fax machines and domain name registrations.

Some states want broadband phone providers to follow the same state rules and regulations as traditional phone providers. But FCC Chairman Michael Powell indicated here at CES he favors a either new regulations for VoIP providers or a hands-off approach for now to allow the young industry to mature.

"Unfortunately, if left unattended, I'm afraid the benefits of VoIP will be smothered by state and federal regulators," Sununu said during a CES panel this week. "A clear pre-emptive remedy is needed now. Congress must establish pre-eminence of federal authority in this area and provide major direction for any action by the FCC."

David Isenberg got it exactly right in his Rise of the Stupid Network paper from 1998, when he argued that the future lay not with traditional "smart" networks like the SS7-based, FCC-regulated, switched infrastructure associated with the AT&T and the Baby Bells, but with "stupid" networks that would serve merely as passive conduits for traffic, instead of trying (and mostly failing) to anticipate all the new applications that their traffic capacity could be used for. Who in his right mind imagines that peer-to-peer filesharing would ever have gotten off the ground if it had depended on the telephone companies forming a consortium, hashing out a brand-new standard and then upgrading all their SS7 switches with new software to accomodate it? And yet, it seems that most politicians are still stuck in such a mindset, or they would not even be contemplating extending the plethora of regulations that burden traditional telephony to VoIP. From a "stupid network" point of view, VoIP is just another form of IP data, like p2p traffic or streamed video, and only under such a regime will it finally fulfill its promise - the inauguration of an age in which international telephony will truly be "too cheap to meter" on a call-by-call basis, regardless of the locations of the participants.

The struggle over who gets to enjoy regulatory oversight of VoIP is likely to prove a vivid illustration of the Public Choice argument that bureaucrats and politicians are, just like their counterparts in the private sector, self-seeking individuals with a penchant for empire-building and self-aggrandizement at the public's expense. The regulators of traditional telephony are naturally worried about what the advent of VoIP is likely to mean for their jobs, and would like nothing better than to either kill the technology before it becomes entrenched as the default alternative, or, if that isn't possible, to burden it with enough rules and regulations that nothing changes from the public's point of view, and cries can continue to ring out for regulatory oversight of rapacious phone companies. The politicians see in VoIP a threat to precious revenue streams and the political patronage they represent; the spooks working for the various Three Letter Agencies perceive (rightly) that their ability to pry in the affairs of ordinary citizens will be severely curtailed should the marriage of strong encryption and IP telephony ever become a routine affair.