State of Communications

Top of Mind

State of Communications

By Paula Bernier, Executive Editor, TMC  |  June 04, 2012

This article originally appeared in the June 2012 issue of INTERNET TELEPHONY

Is it best to put control in the hands of a powerful few that have a detailed understanding of the issues at hand and are in the position to expand business related to it – but also are in a position to tilt decisions about those issues to their advantage? Or is it best to give consumers, and their local or state elected officials, a say in issues that could affect their health, livelihood and/or affordable access to important products and services?

The answers to these questions are once again a matter of debate. In this case, I’m referring to a dust up over a bill to preempt state agencies from regulating Internet-enabled voice and data that recently was passed by the California state senate.

Sen. Alex Padilla (D-Pacoima), the author of the bill, of which AT&T (the fifth-largest contributor to Padilla's campaign) and Verizon (News - Alert) Communications are key proponents, has argued that the law creates more certainty on the regulatory front and will thus enable the Internet to remain open and tech businesses to continue to innovate, according to the Los Angeles Times. Proponents of the bill also have noted that this is simply a reinforcement of California’s existing hands-off approach to the Internet.

Tech innovation and the Internet are, of course, key drivers of the economy in the world and our country, but in California in particular.

However, members of the California Public Utilities Commission say that SB 1161, which passed the California state senate on an 11-0 vote, have voiced concern over the measure, saying it strips the CPUC of the authority to regulate basic telephone services. Opponents of SB 1161 say the problem with that, as noted by the Los Angeles Times, is that it could enable carriers “to skirt mandates to provide phone service to rural communities and to offer cheaper rates and subsidies for low-income and disabled customers.”And in this day and age when the gap between rich and poor continues to widen, some officials want to make sure they’re doing all they can to protect their citizens with the least power.

As noted in an April 18, 2007, posting on the WilmerHale website, there was a similar ruling a few years back, stemming from a move by the Minnesota Department of Commerce to regulate Vonage’s (News - Alert) DigitalVoice VoIP offering as a “telephone service” under Minnesota law. Writes WilmerHale “in the Vonage Order, issued in late 2004, the FCC (News - Alert) broadly preempted state regulation of ‘nomadic’ VoIP services –applications-layer voice services that consumers can purchase independently of their own broadband Internet connections and can use anywhere in the world.” The US Court of Appeals for the Eighth Circuit shortly after that upheld the order, in what represented a major victory for providers of nomadic VoIP services, the piece by attorneys WilmerHale went on to say.

I understand the desire to regulate this kind of thing on a federal level as opposed to a state level, given multiple state regulations create a patchwork of requirements that are tough for a nationwide company to implement. On the other hand, there seems to be a clear pattern of allowing industries to set their own regulations, which has contributed to many of the challenges we now face in terms of the economy.

In any case, it appears as if it will be up to federal agencies and regulators, and those that influence them, to ensure that everybody in the country continues to have access to at least basic communications services. But just how that will work in the future - as big telcos like AT&T (News - Alert) and Verizon, among others, push to dismantle the PSTN, and embrace relatively unregulated broadband networks; and the FCC dismantles the Universal Service Fund and overhauls intercarrier connectivity as part of its broadband-centric Connect America Fund – remains to be seen.

So far, some of the larger and more high profile companies like Verizon and Vonage have come out in support of how things are moving forward, but others, like David Erickson (News - Alert), CEO of, are not comfortable with the way things have been moving forward.

“This [USF/ICC] plan will severely damage competition in the telephony marketplace,” Erickson said last year. “Why? There is not one study or shred of evidence that the FCC’s ‘bill-and-keep’ policy covers the cost of completing a call on a phone network. Thus, small phone companies will lose money on every connection to large phone companies. With AT&T and Verizon controlling 80 percent of the wireline customers and over 65 percent of the wireless customers in the United States, they will bill those customers and keep all of the proceeds, effectively starving the competition that has existed since the 1996 Telecommunications Act.”

Edited by Brooke Neuman