L. Neil Smith's
Number 263, March 14, 2004

Damned if it's Bush. Damned if it's Kerry. Damn.

The FCC and VoIP
by Lex Concord

Special to TLE

Sometimes, technology advances too quickly for the designated federal bureaucracy to keep pace. If you value individual liberty, you applaud these leaps in human progress, and enjoy the fresh air of freedom while you can. If you worry about how a criminal might exploit the new technology, or that the free market might not distribute the benefits equally to everyone, you clamor for protection and for social justice. If you run the ponderous bureaucracy, you start worrying about your job security, and scrambling for reasons to intervene in the peaceful affairs of others.

One such technological advance is VoIP, or Voice over Internet Protocol. VoIP allows individuals to talk to each other over the Internet, partially or completely bypassing the established telephone companies. This offers several economic advantages, including newer technology that more efficiently utilizes communications networks, greater competition that generates downward pressure on prices, and a less stringent regulatory environment that allows beneficial innovations to reach consumers more quickly.

FCC Chairman Michael Powell, aware of widespread resistance to Internet regulation, treads lightly when making the case for inserting the government camel's nose into the consumer's tent. He advises that the government "should begin with the nonregulation of the Internet as the first article of faith because limiting government intrusions... maximizes the potential for innovation and increases opportunity for the nation as a whole." Limited government action always sounds reasonable at first, and allows for greater intervention later, if it should prove necessary for the "public good," or the good of those who control the bureaucracy in question.

As expected, Powell does offer some reasons for FCC intervention in the VoIP market. According to the Washington Post, these include mandating 911 emergency system access, access for the disabled, law enforcement wiretapping capability, and a universal service fund (also known as a tax) to make service available in poor and rural areas. As expected, these match the reasons offered in the past for FCC intervention in the cellular telephony industry, and before that, the original telephone network. The technology may change, but the excuses for interfering with it don't.

Why mandate a 911-type emergency system for the Internet? You can find whatever police, fire, or ambulance service you might need in a few seconds using Google. Entrepreneurs and other concerned citizens are already working to make the Internet more accessible to the disabled. Enforcing government regulations will only slow their progress, and increase their costs.

If you view the government as our benign protector from crime and terrorism, allowing wiretap capabilities on all communications technologies seems a reasonable precaution. But before granting government any new power, it is wise to consider how the most brutal dictator might use that power. Would you want Saddam Hussein or Joseph Stalin to be able to listen in on your phone calls? Living in a nation with democratic elections is no guarantee that your rulers will always be virtuous, or dedicated to limiting government -- both Adolph Hitler and Franklin Roosevelt were elected by wide margins. In a nation that doesn't punish everyone who voted for the Patriot Act with humiliating defeat at the polls as a minimum, any new surveillance power at all might be going too far.

Universal service is another rallying cry for those who would leave no peaceful pursuit unregulated. Even though competition and technological change are driving Internet access prices down at a rate unfathomable to executives in the more heavily regulated telephone industry, impatient do-gooders warn of a dangerous gap between Internet haves and have-nots. This same instinct for equality at any cost led to universal electrical and telephone service before either was economically viable, passing the costs of rural living onto urban and suburban residents, and discouraging research into local power generation or wireless communications alternatives that might have been produced much sooner.

The Internet has advanced more rapidly than other new technologies, precisely because the government has stepped back and watched in bewilderment, trying to figure out what to do next. Freed from central planning and bureaucratic oversight, it stands as a remarkable monument to the ability of free individuals to cooperate peacefully in creating order and progress out of chaos. There could be no greater mistake than to apply the regulatory burdens of the past to the technology of the future.


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