Whenever a new technology hits the radar in Washington and the state capitols, there is an immediate temptation to regulate and, in some cases, tax it. 

Just like the Internet of the early 1990’s, Voice Over Internet Protocol technology or VOIP--a fancy term for the ability to make phone calls over the Internet--has the ability to transform the telecom market. But if it’s overburdened with regulations and taxes, its prospects appear much dimmer than if we let it develop into a flourishing new innovation.

For most consumers, the only difference they will notice using VOIP is that their phone connects to their high speed internet modem instead of the phone jack. Calls sound the same and your ability to make and receive calls is no different than it is today. What is different is the way the data (your voice) is transmitted across the network.

VOIP is more than a cheaper way to carry voice traffic. It’s the foundation for a new generation of consumer services and uses, including instant messaging with voice, online gaming and telemedicine. VOIP already offers consumers the ability to keep their phone number no matter where in the country they move, and to transfer a call easily among home, business and mobile phones. 

More interesting, VOIP is a broadband technology that could speed the arrival of advanced digital services in a telecom market that’s staggering from price wars and excess capacity. With a reported 23.5 million U.S. homes equipped with broadband connections now--and that number expected to double by 2007--there will be more than enough broadband available to support rapid expansion in VOIP services over the next few years.

This isn’t going to happen, though, if VOIP is saddled with heavy regulations, taxes and fees.  Like the Net itself, Internet telephony is groundbreaking technology full of promise. Nothing would kill that promise faster than force-fitting this 21st century technology with 20th century regulation.

FCC Chairman Michael Powell and several other commissioners appear sensitive to that danger.  This philosophy of not stifling VOIP by immediately burdening it with traditional telecom regulations and fees will be put to the test by the FCC’s action on a series of petitions now pending before it.

One petition, submitted by VOIP pioneer Vonage, asks the commission to clarify what charges, if any, VOIP consumers must pay to their local phone companies even when bypassing most of the local company’s copper wire network. Another petition, pushed by AT&T, involves the right of long distance carriers to route calls over the Internet without paying access charges to the local Bell companies, as the long distance companies do with conventional calls completed through the Bells’ local networks. A third petition involves the proper regulation when calls completely bypass the traditional phone network.

In these and future rulings, the FCC needs to keep VOIP as free as possible from arbitrary fees and regulations. The commission’s task won’t be easy.

For the time being, though, the commission’s priority should be to preserve the potential of VOIP by not smothering it with a blanket of regulations and taxes. VOIP could be a technology whose time has come, if the FCC lets it.


Jim Prendergast is the executive director of Americans for Technology Leadership.