TCS Daily

Ensuring Internet Innovation

By Kevin Werbach - September 28, 2004 12:00 AM

This may seem like the best of times for the broadband Internet. Yet there are ominous smoke signals coming out of Washington and several state capitals. For all the recent press coverage of broadband and voice over IP, there is still a need to educate policy-makers about the profound technological changes now occurring.

A number of developments could easily block the broadband innovation wave. Competitive and dynamic Internet applications could be subjected to rules designed decades ago for monopoly telephone companies. State governments pushing for extensive VOIP regulation could create a patchwork of unnecessary and stifling obligations. VOIP providers could be forced to pay bloated access charges to local phone companies, diluting the consumer benefits of the technology. And heavy-handed approaches to legitimate social policy challenges such as universal service and law enforcement access to communications could do more harm than good.

Enter the Internet Innovation Alliance (IIA). "I want to make sure that we don't have Flintstones-era regulation of Jetsons-era technology," declares IIA co-chairman Larry Irving. Irving, who headed up the National Telecommunications and Information Administration during the Clinton Administration, joined with former top Bush Administration technology policy-maker Bruce Mehlman and a coalition of high-tech companies and organizations to found the new organization.

The US led the world in the first wave of Internet development, thanks in part to enlightened policies that allowed and even facilitated innovation. Internet service providers were granted non-discriminatory access to networks, freedom from traditional telecom regulation, and an exemption from excessive access charges. The result was a flurry of investment, competition, new services, and rapid deployment. And not only infrastructure providers benefited. eBay,, Yahoo!, and Google were able to grow from garage startups to large, profitable, influential companies in just a few years because they had the freedom to create innovative applications on top of the growing Internet platform.

As we move into the next, broadband phase of Internet development, though, the prospects for innovation are more uncertain. The consensus favoring limited regulation and taxation of Internet technology is breaking down. Policy-makers looking to raise revenue or achieve particular outcomes are eyeing Internet applications.

In particular, the growth of VOIP, which changes voice communication from the hard-coded output of a regulated network into a broadband application with exceptional innovation potential, challenges old legal models. That's a difficult concept for policy-makers to grasp, Mehlman explains: "One of the reasons the Internet is successful is that those inclined to regulate never saw it coming. A challenge we face with VOIP is that would-be regulators think they know what's coming, but they are wrong about what it is."

The phone system touches the life of virtually every American, and some two billion subscribers worldwide. VOIP, the biggest evolution in telecommunications since the days of Alexander Graham Bell, promises dramatically lower costs, new features, integration with other devices and applications, as well as a more dynamic and competitive communications industry. And it's only the most prominent application that will build on the broadband foundation. Interactive video and audio streaming, instant access to information, telemedicine, distance learning, and multi-player gaming are among the activities that broadband will support.

"VOIP is so much more than plain old telephone service," says Mehlman. "There is a misperception that IP-based applications are simply a different colored phone or a phone with 15 buttons instead of 10." An unthinking extension of old rules created for monopoly telephone companies could have devastating consequences for broadband and the many consumer benefits it brings.

A number of industry associations, including the Information Technology Association of America and the VON Coalition, are already working to promote a healthy environment for VOIP and other broadband applications. Yet more needs to be done, especially to inform and educate the broader audience of users, policy-makers, and companies who don't live and breathe the minutiae of technology policy. "There is little actual discussion of the transformative power of broadband and VOIP," notes Irving.

Many of the important questions IIA will confront involve not a disagreement about goals but confusion about the means to realize them. No one opposes consumer protection, homeland security, universal availability of communications, and a fair playing field for all participants in the marketplace. Yet some of the proposals made in the name of those worthy objectives would instead thwart the innovation that produces lower prices, new services, and other consumer benefits.

If IIA can foster better understanding of these issues, it will make a useful contribution to the vital debate about the Internet's future. Mehlman is optimistic. "When policy-makers understand what's going on, they tend to make the right decisions," he says.


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