Telepocalypse

Why VoIP should be regulated (but only a little bit)

There's been a lot of noise recently about the upcoming FCC meeting on VoIP. Many are concerned that the US government will unnecessarily encumber VoIP providers with irrelevant regulations conceived for a different world.

I believe that VoIP should be regulated, but not in the way that you might think.

Firstly, you have to understand that what is really being discussed is not VoIP per se, but rather interconnection with the PSTN. Stand-alone VoIP is for all intents and purposes beyond regulation. It's too easy to move your client software downloads, proxies and directory servers off-shore, and encrypt traffic from prying eyes. Just ask the folks at Skype. The only alternative is to bring on the full violence of the state and try to outlaw VoIP entirely, as South Africa and Bangladesh have tried to do, with little success.

My position is that the consumer should make up their minds what they want to pay for, as long as there are no externalities or market failures involved. This means that consumers need the facts of what they are being offered clearly presented to them.

The Vonage terms and conditions are a 5800 word opus. Compare this to the dainty 1400 words of a Sprint PCS plan, or humungous 7700 epic from Nextel. Who really reads all this stuff?

The problem with VoIP operators is that the public may be expecting both the product features and regulatory baggage of traditional PSTN, but don't understand that unregulated VoIP doesn't guarantee these.

The Vonage Ts&Cs remind you that their system is unpowered (no electric, no calls); doesn't guarantee 911 service; and outbound number portability is solely at Vonage's discretion. Would the average consumer looking to slice a few dollars off their phone bill understand the significance of this? Even know that they should be looking out for this? Probably not.

What we need is a disclosure form similar to that for credit cards. The FCC's job would be to regulate the form of how the offer is presented to the user -- not the function, and definitely not the price through the imposition of random fees. Regulate market conversations, not markets.