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mjh's Journal: Yes, Vonage is a phone company. But so what? 9

Journal by mjh

Ok. Let's come clean: Vonage is a phone company. They offer a phone service. They market a phone service. They enable calls to every other telephone service in the world. They're a phone company.

So what?

The justification for regulating anything has to be based on the threat that it provides to the society. That's at least part of what it means to live in a free society. Anyone of us is allowed to come up with a better mouse trap and sell that mouse trap as long as that mouse trap doesn't harm society. And the definition of harm does NOT include impacting the business models of those who can't/won't innovate. In other words, the cat sellers are NOT harmed by the mouse trap. They're harmed by their own inability to come up with the mousetrap. The rest of society benefits. So, if it doesn't harm society, you're free to do it. In the case of the traditional telco, those guys have been given a state enforced monopoly. Anyone really think there's no threat to society if the monopoly isn't regulated?

Sure, we could undo the state enforced monopoly, and grant anyone with a backhoe the right to dig a trench and wire up your house. But we tried that already. It sucked. Back when the telephone was first invented (before the concept of "right of way" was applied to municipal wiring) anyone could wire up your house. And frequently anyone did. Unfortunately, all of those companies couldn't (or more likely wouldn't) interoperate with each other. So if you wanted to call Jim, and he was connected to TelcoA, you had to get a line from TelcoA. And if you wanted to call Janet who was connected to TelcoB, you had to get a line from TelcoB. And the procedures for calling Jim were drastically different than the ones for calling Janat. It was a mess and someone decided that a regulated monopoly was a good way to solve it.

Eventually the legislators decided that the monopoly that telcos had been granted did not allow them to pick and choose where they were going to provide service based on the income level of the neighborhood. So they started enforcing that the telco's provide universal service - including underprivileged neighborhoods and schools. The telcos then passed that cost onto the consumers in the form of the Universal Service Fee. The legislators also decided that everyone needed to be able to dial a single number (911) in the event of an emergency. So the telcos were required to establish some sort of priority call routing and mechanism by which this could be accomplished. They again passed this cost onto the customers.

But the key thing to recognize here is this: all of this is the cost that the local telco has to pay for being granted a monopoly on wires running to all of our houses. You get the monopoly you have to behave responsibly. Without the monopoly there is NO justification for regulating a company.

Vonage does not have a monopoly. Nor do any of the more than 500 VoIP providers. Moreover, I am unable to understand what threat of harm to society exists due to VoIP. And without that threat of harm, I am unable to agree that VoIP providers should be regulated like a telco with a monopoly on the last mile.

But, of course, I could be missing something. So my challenge to you (dear reader) is to identify the justification for regulating a non-monopoly like a monopoly. Identify the threat of harm that VoIP providers inflict on society, and then you might convince me that regulation is justified. Until then, I think almost everyone in favor of regulating Vonage or Packet8 or any other VoIP provider misunderstands what it means to live in a "free society".

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Yes, Vonage is a phone company. But so what?

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  • When a company is declared a monopoly and regulated as one, it's an admission that the company doesn't have any competitors. Yet, in exchange for being regulated, that company should recieve a protection of their monopoly status, otherwise we as a society are trying to have things both ways and that just doesn't work. Having a monopoly with competitors is simply a contradiction.

    The idea of having the easy-to-serve customers subsidize the costs of the hard-to-serve-but-we-have-to customers is a good one whe
    • Universal Service is a fee that is passed onto the customers because the ILECs want to make it look like they have no choice. But the reality is that Universal Service is required of the ILEC, not of the customers of the ILEC. It's required of the ILEC because they've been granted a monopoly on the wires running to the house. The price of that monopoly is provision of universal service.

      Your argument in favor of universal service makes a more sense for the cable companies than it does for the VoIP provid
      • There is such a thing as a Universial Service Fund in every state. A tax on every phone service pays into it, qualifying projects get to take money out of it. So, in reality, the money doesn't automatically go to the local ILEC, it's just that the ILECs are getting money by a default... nobody else trying to serve the hard-to-serve and applying for the funds to help with such projects. When to tax and when not to tax seems simple to me. If your VoIP service is either the starting point of a call that your
        • I disagree. I don't think VoIP should be taxed at all. I also don't think that Cell phone providers should be taxed either, but I can see some justification when it comes to the fact that they need to raise towers, etc.

          Cable companies are more likely candidates to get taxed, IMHO, than VoIP providers, even if those VoIP providers interact with the PSTN.

          I do think you have a very interesting argument and I need to give it some thought. I'm not entirely convinced yet, but I'm also having to admit that th
    • Wait a second. If it's so damn expensive to get phone service to rural areas, and they can't show a large benefit (to society) from it, why exactly is it good public policy to require phone service there?
      • There is a large benefit to society to making sure basic POTS is truely universal. Networks become exponentially more valuable.

        I've got a grandma who used to build computers for the old Digital Equipment Corperation back in her working days. She doesn't have a computer at her house, even though she could afford it and certainly could learn how to use it, she doesn't value it enough to spend her money on it. Yet my mom is calling her mom all the time on the telephone. Let's face it, if grandma's basic phone
        • I've got a grandma who used to build computers for the old Digital Equipment Corperation back in her working days. She doesn't have a computer at her house, even though she could afford it and certainly could learn how to use it, she doesn't value it enough to spend her money on it. Yet my mom is calling her mom all the time on the telephone. Let's face it, if grandma's basic phone bill quadrupled she'd drop the service, being able to be called is not worth that much to her, and she doesn't make that many

          • My mom never used to use her cell phone. Then, when the family upgraded to a new cell phone plan that gave us more minutes than we could ever reasonably use, she complained about the cost of the new phones. But once we had it... boy did she use it.

            When there's an incrimental cost, people likely think about it and won't pay it. However, once the cost is sunk in, people have no problem using it.

            This is why E911 isn't an option... nobody would pay for that if they didn't have to.
            • This is why E911 isn't an option...

              But it *is* an option. I don't have to have phone service. If I drop my phone service, or simply stop paying my bill, then I don't get access to 911. If we're going to say that 911 is not an option, then let's include it as part of the local tax collection mechanism, which in municipalities is typically sales tax. And then the municipality funds the 911 service through that mechanism. At which point, the LEC should be *required* to provide 911 service to whateve

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