Pendulum Swings Back To Ma Bell

VoIP fan Michael Powell is long gone, and his successor, Kevin Martin, has transformed the FCC into a public policy heaven for the old dinosaurs of communications. Did VoIP leaders blow the one good opportunity they had with a short-sighted strategy?

 Once feeling like children at recess, VoIP telephone service providers are somewhat chastened after this week's unanimous Federal Communications Commission vote requiring voice over Internet protocol services that connect to the public-switched telephone network to subsidize the network they compete with directly.

But VoIP industry leaders have no one but themselves to blame for the hit consumers will soon take as a result of the FCC's action.

While it might be tempting to symapathize with the plight of a fledgling industry, it was not long ago when VoIP providers had high-ranking policy makers firmly on their side. But they failed to take advantage of their influence to chart a more friendly regulatory course for themselves.

Wednesday's ruling is the second significant blow in a little over a year to the "no regulation" status of Internet commerce, since the FCC voted last May to require Internet telephone companies to provide emergency 911 service to their customers. {mosimage}

The new order also requires wireless telephone service providers to increase contributions to the 70 year-old fund created to subsidize the wired telephone network in rural and low-income areas nationwide by contributing to a Universal Service Fund from new fees imposed on VoIP customers.

Many wireless and VoIP industry representatives decried the move, citing its backward-looking focus on a service waning in usage and demand.

Jim Kohlenberger, executive director of the VON Coalition, which represents the Internet phone industry, told Anne Broache at C|Net the ruling "is like trying to solve traffic and energy problems by stifling the rollout of energy-efficient hybrid vehicles, while subsidizing SUVs."

According to estimates of the ruling's effect done by his group, Kohlenberger says VoIP customers could owe as much as $2.12 extra on a $30 monthly bill because of the changes, while traditional wireline users would pay $1.38 on a comparable bill, and wireless users will pay an average of $1.21.

Jeff Pulver, a pioneer in the VoIP industry responsible for bringing together the technology, its marketers and consumers for well over a decade, told American Public Media, "At a time when America is flying behind the world in broadband deployment, [this ruling] makes no sense whatsoever."

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Understandably, representatives of the traditional telecommunications industry applauded the move as an egalitarian effort to treat all entities offering voice services the same.

It's difficult to muster sympathy for the financial plight of the likes of the members of the U.S. Telecom Association; and it's easy enough to see FCC Director Kevin Martin playing the role of handmaiden to wealthy beneficiaries of White House fondness for big business.

But it may also be the advance men and women for Internet communication missed a golden opportunity.

The VoIP industry had a well-placed and respected champion in Michael Powell, who chaired the FCC from 2001 – 2005. Powell, at the urging of top proponents of emerging VoIP and wireless communication technology — including Pulver and former Vonage CEO Jeffrey Citron — consistently held a "no regulation" policy was best for the development of both the underlying technology and for its commercial integration with the U.S. economy.

To be sure, in the last several years we've seen massive transformation in the methods of storage, transmission, and processing of voice and video information — and the trend isn't likely to abate, regardless of the political bent of the next administration.

The Universal Service Fund ruling, however, signals an official antipathy to any "progress" that might place the spawn of Ma Bell at a competitive disadvantage. Indeed the ruling is a transparent gift to old-guard telecom giants who built the increasingly irrelevant copper/fiber telephone network.

What if the VoIP industry had used Powell's appreciation and indulgence to its advantage? What if it had asked for a secured a five- or 15-year window to develop 911 service instead of demanding that no emergency calling requirments be placed on VoIP providers? What if it had pushed for — and agreed to contribute to — changes to the entire mission of the Universal Service Fund so that rural and low-income areas would also benefit from the deployment of broadband internet infrastructures as well as — or perhaps instead of — the obsolescing PSTN?

Now, a new gauntlet's been laid. When every "voice provider" must contribute equally to funding universal access, development funds ought to reach Internet bandwidth providers. Instead, the FCC has found a way to make consumers in the growing field of Internet communication services pay for the myopia of both the traditional telecom players and the new kids on the block.

If everyone is truly destined to reside in cyber-space, subsidizing PSTN networks in rural areas is a losing effort, and Pulver is correct to call for collective action to increase the availability of Internet bandwidth rather than just telephone fiber. Why, indeed, should a Universal Service Fee subsidize the recovery of past expenses of the largest telecom concerns when a far greater number or rural and low-income Americans would be better served by more access to broadband services?

There was a time the VoIP industry had a tailor-made opportunity to do good, while doing well — pushing for regulatory measures that would ensure consumer protections and expanded social benefits while assuring its contiunued growth with only a modicum of governmental interference. Instead, Pulver, Citron and others argued forcefully for a "hands-off" policy free of any regulation whatsoever.

As a result , the VoIP industry is now just another lonely voice in a growing chorus of interests wishing the government would operate to secure the future for everyone rather than just improving life for its monied friends.