New Administration Principles: Leave Old Rules with Old Technologies

There will be a new administration in January no matter which party wins the election. This is a good time to remember President Reagan’s advice that “as long as we remember our fundamental principles and believe in ourselves, the future will always be ours.”

When it comes to regulation, ensuring that the future is ours depends on applying principles that will promote technological progress and innovation. One such principle is that old rules should be left for the old technologies for which they are intended, and not applied to new technologies.

When technology becomes obsolete, we abandon it. Today, few people use typewriters or Blackberries because laptops and iPhones do so much more. Like old technologies, we must leave the old rules behind and not burden innovative new technologies with inappropriate outdated rules.

A good example is the FCC’s bipartisan approach to Voice over Internet Protocol (VoIP) service. For years, the federal government has used laws and regulations to try to create local competition in the telephone industry. The Telecommunications Act of 1996 and subsequent regulations and orders of the Federal Communications Commission developed requirements that attempted to create competition, especially in the last mile. These include separated network elements, mandatory resale, and indistinguishable cost standards such as the long-term incremental value of all elements, or TELRIC. This has led to countless federal and state litigation to determine what it all means and how it should be applied.

None of this led to the desired competition. Competition became a reality with the advent of cellular technology in the 1980s, which evolved into a ubiquitous voice and data presence with 367 million subscribers. For voice services in homes and businesses, technology and innovation have also come to the rescue, bringing the competition that lawmakers and regulators hoped to create.

VoIP provided the solution. VoIP is an Internet protocol technology that uses a broadband connection rather than a circuit-switched telephone system. Interconnected VoIP, such as Vonage and cable VoIP (such as Xfinity Voice), allows consumers to make and receive calls from the traditional telephone network, as well as to and from other interconnected VoIP providers.

Although consumers may use VoIP as a replacement for telephone service, VoIP is an innovative and different technology. Vonage’s service is nomadic, not tied to a home address and can work anywhere else with a broadband connection. VoIP also offers many innovative features that telephone service does not offer, including calling through a smartphone app. This is a different technology with different capabilities.

The FCC has recognized these differences and, in a number of rulings, has applied separate obligations to interconnected VoIP, such as 911 calling, universal service, privacy and availability obligations. It has considered what obligations the public interest requires and limited the scope of regulation. What the FCC has not done is classify VoIP as a telecommunications service and subject it to all utility telephony regulations. With a few exceptions, the old rules remained with the old technology.

In this environment, VoIP flourished, rapidly gaining millions of subscribers. FCC data shows that in June 2022, there were 68 million interconnected VoIP subscribers and 27 million end-user dial-up access lines (telephone services). From 2019 to 2022, VoIP connections increased at a compound annual growth rate of 0.7 percent. The number of retail dial-up lines declined modestly over the same period, with a compound annual growth rate of 12.9 percent.

A limited approach to regulation has been adopted by the Republican and Democratic FCCs—a bipartisan consensus that VoIP is different from telephone service and should have a different regulatory regime. Of course, this year’s FCC net neutrality order applying utility phone rules to broadband is an example of how the FCC failed to leave old rules with old technologies (that order is currently pending consideration 6^th District Court of Appeal).

The FCC’s recognition that VoIP is a different technology from telephone communications and requires different regulation shows that we can pursue bipartisan policies that support innovation. This shows that regulators can leave the old rules behind.

This is the principle that will make the future ours.