FCC Regulation of VoIP: Legal Debates and Policy Implications

Introduction to VoIP and the FCC Regulatory Question

Voice over Internet Protocol (VoIP) converts voice signals into data packets and transmits them over the Internet. VoIP services remain on the cusp of being included in the list of services regulated by the Federal Communications Commission (FCC). As is well known, the public switched telephone network (PSTN) has been under FCC scrutiny for much of its existence. This paper explores whether a similar regulatory approach can be applied to VoIP — this form of telecommunications delivered through information services — and what the ramifications of such an approach would be.

Many contend that VoIP is the future of voice transmission, with potential improvements in voice clarity and reductions in the cost of calls. This stands in contrast to the traditional method of voice transmission, which relies on towers that aggregate and distribute signals and on cables and wires that carry those signals. VoIP services have been gaining traction worldwide, and this has been particularly true in the United States. Over the past decade there has been a surge in the popularity and usage of VoIP for everyday communications; a Pew study corroborates this, showing that more than half of all American businesses use VoIP for their communications. One of the main drivers of adoption is the relatively low cost of both domestic and international calls, along with mobile applications that facilitate VoIP calls.

Due to this surge in popularity, VoIP has come under the scrutiny of the FCC. When VoIP first emerged, it was categorized under the Internet Technology segment rather than as Telecom technology, which more accurately describes its function. This classification has allowed VoIP to remain exempt from the taxes and regulations that traditional telecom carriers such as AT&T and Verizon must follow. The sole reason VoIP has not been subject to these regulations is that the FCC has, until now, been unable to precisely define — and consequently tax — this technology (Barbagallo).

The FCC seeks to regulate data service providers across three segments: telecom providers fall under Title II of the Communications Act, wireless carriers under Title III, and cable operators under Title VI. However, each of these provider categories now overlaps with the others, and FCC definitions are proving increasingly inadequate. These regulatory gaps create a business advantage for certain carriers over others. New market entrants offering phone services over the internet are not required to follow the same rules that govern older players still dependent on traditional data transmission methods. Companies such as AT&T and Verizon must offer their services to all residents — a requirement mandated under state law — and must also meet standards for dial tones, confirmed connections, and service continuity during adverse environmental conditions. New entrants are not bound by these obligations (Barbagallo).

Industry Stakeholders and Competing Petitions

The NCTA — the National Telecommunications Cooperative Association — represents rural telecom providers and has filed a petition seeking a new FCC rule. That rule would enable examination of ways to promote and sustain the improvement of the public switched telephone network into an IP-based infrastructure through custom-designed economic incentives. These incentives would allow phone companies to recover the costs of carrying IP traffic over their networks and would support universal service goals by extending broadband internet access to rural America.

AT&T, on the other hand, has petitioned the FCC to establish test zones where existing regulations would not apply, and to subject VoIP networks to minimal regulation at the federal level only (Wise, 2013). AT&T's principal argument is that any regulation of interconnection between VoIP services would be excessive and potentially harmful. The company further contends that the FCC lacks the authority under Title II of the Communications Act to regulate interconnection between two Internet Service Provider entities classified as information services — the same category under which VoIP falls (Wise, 2013). However, a pro-regulation advocate has argued that any exchange carrier, regardless of the interconnecting medium, has a duty to negotiate interconnection agreements in good faith (Wise, 2013).

The competing concerns of incumbent carriers, rural cooperatives, and new-entrant VoIP providers illustrate the difficulty facing the FCC. Old-school telecommunications providers such as Comcast and AT&T feel threatened by nationwide Wi-Fi plans and free or low-cost VoIP services in a wireless industry estimated to be worth approximately $178 billion. Incumbents point to definitional technicalities, arguing that VoIP cannot be sustained over time by being offered for free. For new entrants, however, improvements in internet infrastructure mean reduced long-term operational costs (FCC Eyebals VoIP Service).

References

Barbagallo, P. (n.d.). Views vary on FCC role as regulator in all-IP world. Bloomberg BNA. Retrieved June 11, 2015, from http://www.bna.com/views-vary-fcc-n17179872081/

Committee Reports Search Results — THOMAS (Library of Congress). (n.d.). Retrieved June 12, 2015, from http://thomas.loc.gov/cgi-bin/cpquery/R-cp109:FLD010:@1%28sr355%29:

Economides, N. (n.d.). Telecommunications regulation: An introduction. NYU Stern School of Business. Retrieved June 12, 2015, from

FCC — Telecommunications Act of 1996. (n.d.). Federal Communications Commission. Retrieved June 12, 2015, from http://transition.fcc.gov/telecom.html

Regulatory implications of VoIP. (2009). ICT Regulation Toolkit. Retrieved June 12, 2015, from http://www.ictregulationtoolkit.org/en/toolkit/notes/PracticeNote/3289

Gross, G. (2003, December 3). FCC hears views on VoIP regulation. Network World. Retrieved June 12, 2015, from http://www.networkworld.com/article/2328947/lan-wan/fcc-hears-views-on-voip-regulation.html

Mark, R. (2004, October 6). Lawmakers urge FCC to regulate VoIP. Internet News. Retrieved June 11, 2015, from

Schuk, C., & Com, V. (n.d.). FCC to VoIP: 'Be like the phone company.' comp.dcom.telecom. Retrieved June 12, 2015, from http://compgroups.net/comp.dcom.telecom/fcc-to-voip-be-like-the-phone-company/2248954

FCC eyeballs VoIP service for new regulations and open public Wi-Fi network. (2013, October 7). VoIP Catalog. Retrieved June 12, 2015, from http://www.voip-catalog.com/news_item4199.html

Wise, D. (2013, February 1). Should the FCC regulate VoIP services? AVOXI. Retrieved June 11, 2015, from