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May 25, 2011

States Should Deregulate ALL Phone Services – Not Regulate New Ones

The Vermont Public Service Department is urging the Vermont Public Service Board (PSB) to regulate Voice over IP (VoIP) services offered by Comcast as it does POTS – Plain Old Phone Service. According to James Porter, telecommunications director for the Public Service Department as quoted on Vermont Public Radio, "from a regulatory perspective, as more and more consumers use the service, it becomes more and more important that their rights are guaranteed for that service." Comcast now provides the equivalent of more than 100,000 phone lines over its cable network in Vermont and trails only FairPoint in number of voice customers served in the state. FairPoint's competing service IS currently regulated by the PSB.

What Porter is ignoring in the statement above is that the customers for those 100,000 access lines chose Comcast's unregulated service over regulated alternatives from FairPoint and other smaller providers. Other customers have chosen cell service (which the state isn't allowed to regulate) as their only voice connection. Still others have chosen so-called nomadic VoIP providers like Vonage, which states are also forbidden to regulate as traditional carriers. The legal questions involved in whether or not states can regulate a non-nomadic (you can't carry it from place to place) service like that provided by Comcast are complex; the public policy question is much simpler: customers who chose a non-regulated service over a regulated one don't need and may not want regulatory protection. Regulation makes a service both more expensive and less innovative. Even if the state is allowed to regulate Comcast's voice service, it can't regulate cellular or nomadic VoIP; so there will be those who depend on voice service which is not regulated no matter what the PSB does re Comcast.

Porter also says: "fundamentally, the department believes that it's [Comcast's] the same service that's provided by FairPoint for point-to-point telephone service." Here, he has a point. Technically there's actually a huge difference in how the services work; but, from a customer PoV, they're pretty much the same thing. So, is it fair that FairPoint and other POTS providers in Vermont are regulated while Comcast is not? Does this regulation make public policy sense?

No. FairPoint and the other local carriers in Vermont should be deregulated everywhere that there is a competitive alternative to their service available. Existing regulation is based on a presumption of monopoly which is no longer a fact in most cases. The switch to Comcast is evidence of that. It should be public policy to make sure that broadband and/or cellular services do enable competitive voice service everywhere in Vermont in the next three years (universal broadband and cellular coverage in 2013 are already state goals). Other states which are considering regulating some VoIP should instead concentrate on doing away with monopoly situations which make regulation necessary.

There should be truth in labeling with government enforcement at some level so that consumers will know what kind of service they are buying. For example, Skype says it doesn't support 911; Vonage says it doesn't. Class action lawyers keep an eager eye out for infractions. All cellular providers are required by federal regulation to support 911.

It's my belief that POTS as we know it will be gone in a few years because of consumer choice. But POTS providers deserve an unregulated chance to prove their detractors wrong. The competition between traditional and non-traditional voice providers has already dramatically reduced the cost of voice calling. We all benefit from it.

Full disclosure: I founded a VoIP company in 1997 and was employed in the industry through 2004. I was also Policy Director of the VON Coalition which opposes the proposed action by the PSB. I no longer have any financial interest in the VoIP industry nor am I associated with VON. I am also a Board member of the Vermont Telecommunications Authority (VTA) but am writing only for myself.

Related posts:

The Ugly End of the Phone Network

Planning for the Ugly End of the Phone Network

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