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News Release
January 6, 2004
CONTACT: David Fish
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VoIP: The Metaphysics of Telecom Markets
Future of Internet Phones Shouldn't Turn on Word Play, Expert Says

WASHINGTON, D.C. - Never mind the technical promise and economic power of voice over Internet Protocol (VoIP). An even more powerful determinant of this new and promising communications technology may be regulatory word play – what one expert humorously refers to as the “metaphysics of VoIP.” And in this game, he says, regulators hold considerable sway.

“Much of the upcoming debate before federal and state regulatory authorities on whether and how VoIP should be regulated is going to be downright metaphysical,” writes Progress & Freedom Foundation Senior Fellow and Director of Communications Policy Studies Randolph J. May writes on CNET. In deciding whether VoIP is a ‘telecommunications service’ or an ‘information service’ – and, thus, subject to public utility economic regulation or not – “the contending sides will argue about many things other than the marketplace realities.”

According to May, the list includes: “the shape of the terminal equipment” (does it look like a phone or a computer), the name under which it is marketed and the heritage of VoIP providers (were they ever related to AT&T). Finally, the real brain-buster: what to do about a joint offering, say by SBC and Yahoo?

“What’s a regulator to do?” May writes. “I say: Just focus on the observable fact that to the VoIP customer, the service not only seems substitutable for POTS, but is, in fact, essentially substitutable in terms of the trade-offs involving price and service quality. And given the rapidly growing competitiveness of the telecom marketplace, there is no sound rationale for traditional economic regulation of VoIP.”

Despite the prospect of regulatory word games, May sees the VoIP debate as a potential means to deregulate the telecommunications sector. “As digital broadband increasingly displaces analog narrowband service – and as unregulated wireline, cable, wireless and Internet service providers compete for the consumer’s communications dollar, often with bundled service packages – the policymakers should use VoIP to seize the opportunity to move quickly to create a uniform deregulatory environment for all the players. Regardless of what the metaphysicians say.”

The Progress & Freedom Foundation is a market-oriented think tank that studies the impact of the digital revolution and its implications for public policy. The Foundation is a 501(c)(3) nonprofit organization founded in 1993.



The Progress & Freedom Foundation