TCS Daily

Voice Over the Internet: Let It Fly

By James K. Glassman - January 29, 2004 12:00 AM

A big reason the Internet has taken off is that government has kept out of the way. Hands-off is always the best policy for a new technology. It lets innovators innovate and investors avoid the extra risks of special taxes and rules.

Consider aviation. Last month marked the 100th anniversary of the Wright Brothers' Kitty Hawk flight -- which created entire industries, lifted the U.S. economy to new heights, changed the world.

But imagine if railroad regulators had burdened Wilbur and Orville and their successors with regulations requiring planes to have brake lights, whistles and a caboose and charging them a few cents for every mile of "track" traveled in the air. Aviation would have been set back decades.

Today, the Internet is now on the verge of a development likely to spread super-fast, inexpensive broadband connections to the majority of U.S. homes and, among other things, change the way we get health care and educate and entertain our families. Regulators will soon make a crucial choice: whether to apply railroad rules to modern Wright Brothers or free the planes to fly.

The catalyst is known familiarly as VoIP. It enables packets of voice signals to travel over the Internet. Voice becomes an Internet application, like e-mail. Michael Powell, the chairman of the Federal Communications Commission, calls VoIP "the most significant paradigm shift in the entire history of modern communications."

VoIP has been around awhile, but, thanks to new investments, it has made a breakthrough. It started, says Wired magazine, "as a geek-out for corporate penny-pinchers. But now making phone calls using Voice over Internet Protocol is resonating with consumers.... [It's] a disruptive technology that's making conventional phone companies nervous." Already, 10 percent of calls use VoIP and "the adoption curve is arching steeply skyward."

VoIP improves quality and lowers costs. It can connect your phone to every other device you've plugged into the Internet. Your calls can follow you to any phone number. You can put together your own giant video conference calls. VoIP will lead to monthly flat-rate calling anywhere. For businesses, productivity gains are enormous.

Experts see VoIP as the "killer app," the powerful application that will inspire Americans to subscribe to broadband. Today, 20 percent of U.S. homes have broadband -- up from 5 percent when President Bush took office. That's a start, but with VoIP, the figure should grow to 50 percent in a few years.

Meanwhile, VoIP is already igniting an explosion in investment that will eventually employ hundreds of thousands of new workers at companies like Lucent, Net2Phone, Intel, Dell, Comcast, Vonage, Qwest, Cisco, SBC, AT&T, Oracle and start-ups we can only guess about. It's a timely cure for a recovering economy.

What can stop VoIP dead in its tracks? The same thing that could have stopped the Wright Brothers -- rules and taxes created for another era and a different paradigm.

Said a recent news story in the Wall Street Journal, "Because of the Internet's regulation-free status, phone calls sent as tiny electronic packets over the global computer network avoid all of the regulations, taxes and fees of the traditional public phone system."

So far, anyway. But companies with an interest in maintaining that traditional system are complaining that VoIP is not really an Internet application. It's more like a long-distance phone call. So it's subject to rules and expensive access fees that will jack up costs to consumers and kill VoIP in the cradle.

The FCC's Powell can cut through this nonsense and make a historic decision to keep the Internet free. Last week, he said, "If you're going to say that Voice over IP is something that needs regulation, then you're going to have to explain to me why e-mail isn't also, or streaming video or instant messaging is not also."

Such free-market rhetoric is encouraging, but with Powell, you never know. In an act of political hair-splitting, he's hinted he may liberate some VoIP systems and not others.

That would be a terrible mistake. Battles over metaphysical questions as "what's a long-distance call?" are Washington's stock in trade. But, in the real world, they're absurd insider disputes that aid rent-seeking firms and deter progress. The question here is simple: Will gloriously disruptive VoIP help consumers and businesses and boost the economy, like the Wright Brothers' revolution?

The answer is "Yes!" and the FCC's job is to get off the runway and let VoIP take off.


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