Faulty Wiring

The FCC wants you to ignore its latest decision

Last week the Federal Communications Commission came close to declaring itself irrelevant. In a dispute between big phone companies the FCC basically told them to go figure it out for themselves, or in other words, behave like the FCC didn't exist. Further, FCC Chairman Michael Powell took time to explain that the FCC's action was a very narrow decision, certainly nothing that should be widely applied. Move along, nothing to see here.

Not surprisingly, the dispute concerned Internet telephony, the 400-foot genie the FCC is desperately trying to stuff into one of its pre-approved regulatory boxes before the bureaucrats' whole regulatory regime comes crashing down. AT&T wanted to use the Net to by-pass the $9 billion in access charges the local Bells levy on AT&T's long-distance calls. But unlike true Net phone start-ups, AT&T still does use the old circuit-switched network to start and end its calls. Because of that the FCC ruled that AT&T cannot escape entirely paying the local guys something. But in a twist, the FCC admitted it had no idea what that something should be.

AT&T and SBC Communications were left to settle on a price by themselves, much like auto-part makers or snack-food companies might. In short, the FCC said take a shot at finding a market price. This a staggering approach for an entity that can quite confidently price things down to tenths of pennies.

A glance at any phone bill will confirm that the FCC is not shy about making up prices for things. That is why phone companies can charge $8 for two cents worth of call waiting every month. The FCC has decided that is a fair way to subsidize basic dial-tone service. The old phone network is clogged with pots of money the FCC builds up in order to subsidize other things, and it is those pots of money Net telephony threatens.

The FCC seems to want all the big phone players to migrate their voice traffic to the Net in such a way that the old system can be kept on life support. So while AT&T cannot be allowed to stop paying billions in access fees immediately, a slow pullback might work. The trouble with this approach is that it signals that true Net telephony players do not have a place in the FCC's world, or if they do it will only be at a price.

Regulators in Washington can deny it, but their present hands-off approach to voice over Internet protocol stance could very easily be reversed with some sort of "universal bit fee" that is levied on every high-speed Net connection. Congress is certainly already thinking along those lines, carving out a VoIP exception to Net tax bans. And to make that stick, legislation under discussion defines VoIP as a piece of software, creating the possibility of the first federal software tax. All of this to try to keep 70 years of status quo phone regulation in place.

It is a fool's game, however. The homogenous dial-tone service is gone forever and the easy-to-meter and tax and subsidize days with it. Broadband is impossibly hetero; no two people use the exact same service in exactly the same way. The idea that one group of users should subsidize another group of users is absurd.

But here is a deal: Chuck the entire state and federal regulatory telephony structure and replace it with a $5 connectivity tax on the 1040 form and we'll call it even.