Subject: [NEXTEL-1] The Future Has Caught Up With Us

From: [email-masked]
Date: Tue, 14 Oct 2003 01:21:40 -0400

October 14, 2003
The Future Has Caught Up With Us

If you read BBR's cover story this issue on the dispute over the extension of the
Internet access tax moratorium -- and especially if you read it in conjunction
with
stories in three straight issues now about state regulatory bodies asserting their

authority over Voice over IP service, some conclusions are inescapable.

One is that there's a lot of fear and uncertainty out there. Some people argue
that
nothing's happening, while others scream that the sky is falling. The Multistate
Tax Commission's paper arguing that the new Internet Tax Non-Discrimination Act
will leave us without schools, police or firemen is well out on the latter end of
the
spectrum. Whether or not taxing Internet access is a good or bad idea, MTC
seems to have somehow gotten the idea that the bill is a half-step shy of full
diplomatic immunity. They're practically describing ISPs running amok in the
streets, gunning people down in cold blood and defying the police to stop them
because they are Internet service providers.

On the other hand, there's clearly something going on. VoIP providers are under
siege by no less than three states as of this writing that want to incorporate
them
into their existing telephony regulations. And the providers are arguing that they

aren't subject to those regulatory schemes, with regard to telecom taxes or other
requirements, because they are not telecom providers but information service
providers. That is precisely what the shallower waters of the MTC argument
describes.

Putting dollar signs on all this gives all sides additional incentive to push
their
interpretation of things as far in their own direction as they can. Ultimately,
though,
this is only partially about taxes. That doesn't seem to be the big issue for VoIP

providers -- indeed Vonage has begun collecting a regulatory recovery fee from
subscribers with the apparent expectation that at some point they'll be paying
into
various telecom funds. It has more to do with the direction of telecom regulatory
policy in a new world that's just beginning now to eclipse the old one.

We evolved a regulatory framework for telephone service over the course of a
century. That's a long time, and we took the concept far from its original roots.
At
first that meant things like a regulated monopoly and universal service. Later, we

shifted to things like separate regulatory domains for calls inside and between
artificial geographical areas and required leasing of lines to competitors based
on
a pricing methodology that involves reading the entrails of a goat. Basically,
we've
developed an enormous, byzantine set of regulations to mold POTS, like a bonsai
tree, into the form we wanted.

Then along comes the Internet, followed by broadband and the concept of a
network where voice is just one of many data applications sharing the same
infrastructure. There are obvious benefits to this approach, but the POTS
regulatory structure is such a hyper-evolved shape that the only way to cram
something else into it is to cut off all the parts that aren't POTS, and then
you're
right back where you started.

So we tried to wall off the Internet from telephony. We weren't going to mess with

the POTS framework because it was already shaky and it would make a lot of
noise and kick up a lot of dust if it came down. Telephony regulation would
wheeze along as it had always done and the Internet would grow someplace off
over here.

That bought us some time, but if anybody thought it was a permanent solution,
they should know better by now. It was already infuriating the telcos, which found

themselves offering regulated telecommunications services while their cable
competitors got off the hook as providers of an information service.

The bills extending the Internet tax moratorium try to draw a rigid, unbreakable
line
between voice service and the Internet. With regard to VoIP the aide to Rep.
Christopher Cox interviewed for our p. 1 story told BBR, "we do not say that VoIP
is non-taxable. That is an issue that is going to be, I'm sure, debated and
wrestled
with by state government, by state regulators, by Congress, and by the FCC,
probably over the next several years."
He's right, of course. But why? The whole point of Cox's bill is that packets
representing graphics or typed text or even digitized audio are non-taxable and
more generally outside the scope of telecom regulation. What's so special about
packets of digitized audio if the audio in question is voice instead of music? Is
it
that person to person communications is inherently different? Well then what
about online instant messaging?

The simple fact is that, sooner or later, we're going to have to tear down the old

regulatory edifice and build something to make sense of broadband. That idea
badly frightens a lot of people, from telephone companies, state and local
authorities, Congress, lobbyists and investment fund managers to all those
supposed widows and orphans subsisting on telephone company stock. Nobody
knows what will happen if we just take a wrecking ball and knock down the
existing framework.

But it's got to happen, and we clearly can't put it off much longer.

The Last Word is a regular feature of PBI Media’s Broadband Business Report
http://www.telecomweb.com/cgi/catalog/info?BNN
http://www.wirelesstoday.com/broadband/last_word.htm

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