Networking

Hey Michael Powell, you're too late!

Intellectual-property attorney Konrad Trope has a message for the bureaucratic powers that are considering what to do about VoIP: The Internet is already regulated.

Internet company CEOs and government officials are apoplectic about the prospect of Internet telephony technology being subjected to government regulation.

Unfortunately, these free-market advocates, including Federal Communications Commission Chairman Michael Powell and New Hampshire Sen. John Sununu, overlook the fact that the Internet--and voice over Internet Protocol (VoIP), in particular--is already subject to myriad government statutes and court decisions.

VoIP enables people to make phone calls through their computers over the Internet.


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What makes this Internet technology attractive is that local and long-distance call plans with many VoIP companies are 20 percent to 30 percent less expensive than calls made using the traditional public switched telephone network, or PSTN, which has been around since the late 19th century. Why the price differential? VoIP technology uses the Internet, which has been left largely unregulated and untaxed to help spur its growth and development.

Unlike companies that use the PSTN, providers of VoIP are not required to provide universal telephone service, or access for the hearing-impaired. VoIP companies do not have to pay the taxes and tariffs that provide these government services. Only companies that use the older telephone network are required to provide these services and thus pass on the costs of these government-mandated services to their customers.

So when the question of imposing tariffs or other regulations on VoIP is raised by the California Public Utilities Commission, the Minnesota PUC or even some commissioners at the FCC, a sharp howl is heard from those who say the Internet is a product of the free market and must remain free of government regulation if VoIP is to prosper.

The Internet originally was a high-speed telecommunications network among university scientists working on federal government research projects during the Cold War. The network enabled the scientists to freely exchange data, experiment results and notes.

While the scientists involved may have had a free flow of ideas among themselves, their work was classified. In addition, the research of these scientists was funded with federal grants derived from federal tax dollars, while the initial Internet that linked these various university scientists from around the country to each other was also funded with federal tax dollars.

Thus, from its infancy, the Internet has always been accompanied by some sort of government regulation.

The Internet has always been accompanied by some sort of government regulation.
And the Internet was a creature paid for with federal tax dollars, derived from income taxes, import tariffs, and taxes charged against the telephones of consumers and businesses. What's more: Recent federal court decisions make it clear that the laws of copyright and trademark protection apply to the Internet, just as any other channel of commerce.

Looking over the horizon, federal agencies such as the FBI, the Securities and Exchange Commission, the Federal Trade Commission and the U.S. Attorneys Office will require additional funding to enforce already existing laws to VoIP telephony. Where will that funding come from?

Financially strapped states like California are already exploring the possibility of taxing VoIP, especially since revenue streams from taxing PSTN phone calls will diminish, as VoIP services expand without contributing to the public coffers. Thus, there is political and economic pressure to impose some sort of tax-tariff paradigm, either at the state level or the federal level.

The federal courts are split on the issue. The Ninth Circuit Court of Appeals, on Oct. 6, 2003, classified cable operators as providing "telecommunications" services as defined in the Communications Act, when Internet access is involved. Thus, cable operators would be subject to FCC regulations that affect telecommunications companies.

Then on October 16, a federal district court judge in Minnesota ruled to the contrary and declared that Vonage, a VoIP service provider, is an information service provider. The court noted "Congress's mandate that the Internet remain unfettered by regulation."

With these two inconsistent court decisions, a vitally important policy debate has been stopped in its tracks, at least until the Supreme Court reverses one of these decisions--or until Congress decides to act.

A vitally important policy debate has been stopped in its tracks, at least until the Supreme Court reverses one of these decisions or until Congress decides to act.
Therefore, as a country, we face some major decisions that will set the foundation for years to come in the regulation-of-the-Internet debate. First, if we are willing to acknowledge that the Internet is not a creature born of the "free market", then we can better decide how much government subsidization we want to provide to VoIP, just like our farm subsidies and the subsidization of the NASA program.

Even the FCC acknowledged in 1998 that the definitional differences between an "informational service" and a "telecommunications service" may be outdated or archaic, given the development of the various services, service providers and technological advances related to the Internet.

Instead of clinging to the definitions of "informational" versus "telecommunications" set forth in the 1984 version of the Telecommunications Act of 1996, perhaps there should be a complete re-evaluation of these definitions.

If consumers and providers alike want the courts to stay out of the debate, then Congress has to consider a complete overhaul of the Communications Act of 1934. The courts, at the moment, are "stuck" with applying these possibly outdated definitions, as codified in the Communications Act, to rapidly changing technological paradigms.

By acknowledging these factual underpinnings, the debates concerning the regulation and development of the Internet might avoid ideological confrontations and instead possibly encourage rational, logical public policy.