Technology Law Column

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Published in the Chicago Daily Law Bulletin, April 11, 1996, at page 5.

Phone Companies Urge F.C.C. to Disconnect Competitors.

Copyright 1996 by David Loundy

Earlier this year sweeping telecommunications reforms were signed into law in the form of the Telecommunications Act of 1996 (PL 104-104). The law seeks to, among other things, deregulate portions of the telecommunications industry. A group of telecommunications companies have filed a petition with the F.C.C. to allow the F.C.C. to regulate in a new area, by requesting the F.C.C. assume control over the Internet in order to regulate some of the content being transmitted.

The material at issue is Internet telephony. Sending a message by e-mail is nothing new, it is just a form of data which is sent over a network. Taking a step forward, using a microphone, you can digitally record the same message, and transmit the sound file over the same network-- just another type of data being transmitted over the same network. Of growing interest, however, is new software that allows you to send that same message live, in audio form. This software, made by companies such as VocalTec, Quarterdeck, and the Internet Telephone Company, allows users to make a voice connection with another user of the same software package, and communicate in real time over the Internet-- just as if they were using a telephone. The software often does not provide good quality sound, often does not make a reliable connection, and calls are not necessarily easy to connect-- but all of this is improving.

So far, Internet telephony has largely been a novelty. Many even consider it (and live video over the Internet) a nuisance in that it requires too much of the limited network bandwidth. To others, the term nuisance is too polite-- they see Internet telephony and video as abuse of the network, resulting in substantially degraded performance for all Internet users due to telephony's high bandwidth demands.

However, MCI, which carries around 40 percent of the Internet's traffic on its network, has announced plans to triple its capacity by mid-April, and the National Science Foundation is soliciting grant proposals to develop methods to speed up Internet traffic. In addition, as to Internet telephony's novelty, the Free World Dial-up project is now in operation.

The Free World Dial-up Project (FWD) is a volunteer effort to turn Internet telephony into something truly noteworthy. (Its home page is at Publicly available since the end of February, FWD provides an interface between the Internet and the traditional telephone network.

Volunteers take the free FWD server software and run it on a computer equipped with a particular kind of modem. Internet users can then obtain "Internet telephone" software, call up a local Internet provider, connect to a FWD server in the appropriate city, and place a phone call. The FWD server receives the Internet phone call, dials the local number, and connects the Internet user to the desired party over the traditional telephone network. In other words, sitting in my study in Highland Park, I can call Jakarta or Moscow for the cost of a call to Northbrook.

About ten cities have operational FWD servers, and there are commitments for servers in another 60 cities world-wide. Needless to say, this has the long-distance telephone companies a tad worried. Worried enough that America's Carriers Telecommunication Association (ACTA), an organization of more than 130 telecommunications companies (most of which are resellers of long-distance service) have petitioned the F.C.C. to exert control over the Internet and regulate Internet telephony (Rulemaking 8775).

The ACTA petition (available on the Internet at asserts that the providers of Internet telephony software are telecommunications carriers. As such, they should be regulated, and tariffed, like common carriers by the F.C.C. and local regulators. ACTA claims that by failing to regulate and tax creators of Internet telephony software like other phone companies, there will be insufficient support for the telecommunications infrastructure, which in turn will lead to the collapse of the telephone network and various state and national programs (not to mention ACTA's member's businesses).

ACTA claims that the F.C.C. has authority to regulate the Internet under the provisions of 47 U.S.C. 151, which created the F.C.C. in order to regulate (in part) wire communication so that U.S. citizens will have access to efficient communications at a reasonable price. ACTA asserts that because Internet transmission is a form of wire communication and Internet bandwidth is not infinite, "legitimate" Internet traffic will be impaired or displaced, and thus the F.C.C. should "define the type of permissible communications which may be effected over the Internet." Just as the F.C.C. regulated cable TV to protect local broadcasters, ACTA requests that the F.C.C. should regulate Internet traffic to protect phone companies.

In response to the ACTA petition, the Voice on the Network Coalition (VON) was formed (located on the Internet at The Coalition, and other opponents, claim that F.C.C. regulation of Internet content goes against the objectives the deregulatory measures just passed into law.

The Advanced Telecommunications section of the 1996 Telecommunications Act (47 U.S.C. 157) states that the F.C.C. is directed to promote the development and deployment of "high speed, switched, broadband telecommunications capability that enables users to originate and receive high quality voice, data, graphics, and video telecommunications using any technology." By regulating and taxing Internet telephony, instead of removing impediments to the development of new technologies, the F.C.C. would retard the growth of these technologies.

Worse still, it puts the F.C.C. in the position of needing to regulate the content of traffic on the Internet. While it is supposedly technically possible to determine which data packets on the network consist of a message sent by e-mail, which packets constitute the same message sent as a sound file, and which are the message conveyed by Internet telephony, to determine which files are which for the purpose of regulation requires monitoring of all data conveyed over the network.

Proponents of Internet telephony do not see it as the death of the telecommunications infrastructure-- they see it as increased competition. Revenues to support the increased bandwidth requirements of the technology will be collected not as tariffs, but as increased access charges billed to customers by Internet Service Providers. The VON Coalition sees the ACTA petition as an attempt by long-distance resellers to prevent hampering of their businesses by increased competition.

Some argue that the ACTA petition is not aimed at the taxation of Internet telephony providers, but is rather a roundabout way of demonstrating that the tariffs on traditional telecommunications providers should be reduced. Others worry that a byproduct of the growth in Internet telephony and video will be metered network usage to pay for the higher bandwidth requirements of the technology. This, in turn, will result in impaired advancement of new technologies and a decrease in useful materials being made available caused by a new price tag being added to the development and distribution process where now there is only a flat fee.

Regardless of your viewpoint, the ACTA petition raises some serious questions about the future of the telecommunications infrastructure, and in particular about how the Internet is viewed. Many efforts have been made to analogize the Internet to one communications medium or another. Users and service providers often wish that the Internet were regulated like a common carrier, so as to prevent the need to regulate content, yet this petition demonstrates that common carriers are subject to tariffs and other sorts of regulation.

The difficulty in classifying the Internet is shown by the fact that ACTA has not chosen to question the actions of Internet Service Providers who allow Internet telephony traffic, but it has complained about the manufacturers of the software that allow the service providers to act as a long-distance carrier. To stretch an analogy, this is like arguing that, instead of regulating FedEx or Airborne Express like the postal service, we should instead regulate the manufacturer of mail bags.

I have long been a proponent of regulating the Internet not as one entity that is fit into a pigeonhole, but rather based on how it is used. Cases such as this one show that perhaps both of these approaches are wrong. The Internet is not a long-distance company. It is not always clear when data transmission ends and voice and video transmission begins. I think we are well overdue for some new classifications that recognize the uniqueness of this medium.

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