If It Walks and Quacks Like a Duck, is It a Duck?

“If it walks like a duck, it’s a duck.” That adage actually describes the general line of thinking that federal level regulators have followed whenever technology transitions happen in the “telecommunications” (common carrier) industry.

Were that not the case, every major introduction of new technology (digital central office switches, packet switches, each new generation of mobile networks) would be cause to reexamine regulatory formats.

Three decades ago, for example, big questions were raised about whether voice over Internet Protocol should be regulated the same way as time division multiplex telecom services, or whether VoIP was a data service that should be unregulated.

To make a long story short, regulators have settled on the notion that when VoIP is used and sold as a telecommunications service (interconnected voice service), that is how it will be treated. When messaging or other forms of IP voice are used as a peer-to-peer app, such uses have continued to be seen as unregulated information services.

But another period of potential rulemaking seems to be arising again. A district court and appeals court has ruled that VoIP is an information service, essentially challenging the prior notion that VoIP is a telecommunications service.

“The district court ruled that Charter’s VoIP service is an ‘information service’ under the Telecommunications Act and that state regulation of Charter’s VoIP services was therefore preempted. Because we agree with the district court, we affirm,” the appeals court has ruled.

One might think we have settled the issue of how to regulate VoIP, but the Minnesota Public Utilities Commission and Charter Communications disagree. The MPUC wanted to regulate “Charter Advanced,” the business unit that offers the VoIP service, as a “telecommunications service.” That is rather something many had assumed was settled decades ago.

Charter argues that its service “Spectrum Voice” is an “information service” under the Telecommunications Act of 1996. That then leads to the notion that Spectrum Voice cannot be regulated by the PUC.

The court actions are a shock. They conflict with federal policy and therefore will have to be resolved, again, by a higher court. One has to assume that the principle of federal preemption will be invoked again.

In the past, new technology has raised issues about state level versus federal level regulations, among them the argument that “50 different sets of laws” will inhibit the supply of advanced new technology. The result, in such cases, has tended to be federal preemption of state-level rules.

The appeals court decision almost has to be appealed to the Supreme Court, as the recent decisions once again raise issues, not only about jurisdiction (who gets to decide?) but on the fundamental issue of whether voice is an information service, for purposes of regulation, or a telecommunications service.

I thought that issue--whether VoIP is an information service or telecom service--was settled some decades ago. Perhaps the Supreme Court will agree that, indeed, the issue has been settled. It might also happen that the U.S. Congress steps in, as is its right, to settle the issue legislatively.

There are several sets of issues: who has jurisdiction over VoIP and telecom services, and in what areas? Also, there is the fundamental issue of whether interconnected voice is a “telecom” service, with telecom regulatory rules, or an information service, with data services rules.

Many believe the current and possible ultimate decisions will have implications for network neutrality rules, as the Federal Communications Commission rules specifically state that the FCC’s rules preempt state rules on net neutrality. That is the jurisdiction issue.

What seems even more fundamental, though, is the issue of whether interconnected voice actually is an information service. That is a decision with profound implications. Since all voice services--interconnected or peer-to-peer--now use IP platforms, there now is at least an opening for a major reexamination of utility regulation for voice services generally.

There are huge institutional barriers to reconceiving voice services as “data services,” for purposes of regulation. For that reason alone, it seems unlikely we will see another major reexamination of how VoIP should be regulated (aside from jurisdictional issues).

But it is stunning to see such court decisions three decades after courts and regulators essentially settled the issue.

Perhaps it is misplaced, but I am reminded of an adage coined by economist Hyman Minsky.

source: AZ Quotes

In other words, stability is destabilizing. Long periods of calm cause risk taking behavior that make the next downturn more violent. Paradoxically, instability is stabilizing, since it reduces the amount of risky behavior people and companies are willing to take.

Maybe our long period of stability in telecom regulation has created more pent-up instability. Certainly some of us might find the recent court decisions shocking.

Telecom regulation of VoIP has been that “If it walks like a duck, and quacks like a duck, it is a duck.” The Minnesota district court and appeals court rulings suggest the opposite.