February 17, 2006

Regulatory Status of VoIP in the Post-Brand X World

  • Jerry Ellig

    Research Professor, George Washington University Regulatory Studies Center
  • Alastair Walling

Key materials
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The Study

  • Examines the legal and economic rationales for classifying Voice Over Internet Protocol (VoIP) as an information service or a telecommunications service.
  • The issue is significant because VoIP works like an information service but is a good substitute for traditional telephone service.
  • VoIP would likely bear much heavier regulatory burdens if classified as a telecommunications service.

Our Findings

  • The Supreme Court’s Brand X decision clarifies that even if the FCC’s determination conflicts with that of a court, the FCC’s judgment holds sway as long as the decision is reasonable.
  • The Internet Protocol nature of VoIP technology means that it functions like an information service, rather than a telecommunications service.
  • In the Telecommunications Act of 1996, Congress clearly sought to bring competition to all communications markets; encouraging the development of VoIP by classifying it as an information service comports with congressional intent.
  • Economic analysis demonstrates that subjecting VoIP to the full panoply of telecommunications regulation would significantly reduce consumer welfare.
  • The FCC’s own experience shows that, if the FCC believes that some selective regulation is necessary, it has ample authority to impose targeted regulation without subjecting VoIP to all regulations that affect telecommunications services.

Conclusion

The most reasonable option is for the FCC to classify VoIP as an information service. By declaring VoIP an information service, the FCC could free it from some of the most costly and least relevant aspects of telecommunications regulation while reserving the right to regulate selectively when it believes circumstances warrant.