In an on-stage interview in McCormick Places grand ballroom with Matthew Flanagan, president of the Telecom Industry Association, Powell reiterated his well-known aversion to regulating developing telecom technologies like voice over IP, while acknowledging the federal governments role as manager of licensed spectrum and overseer of equal access to broadband.
The issue is of great concern to VOIP providers like Vonage Holding Corp. and others offering IP telephony to businesses, since a lot of their competitive price advantage stems from their freedom from federal and state regulatory service charges. These charges go to the Universal Service Fund, established early in the twentieth century, when the federal government granted Ma Bell monopoly status in exchange for guaranteeing to wire up unprofitable rural communities.
VOIP providers, led by Vonages Jeff Pulver, have fought in state courts to have VOIP recognized as an Internet-like application and not as an alternative telco, subject to regulation. A Minnesota ruling in 2003 found against Free World Dialup, Pulvers free PC-to-PC VOIP service. The ruling was later overturned in federal court. A subsequent New York state ruling in May 2004 found against the VOIP service and, as yet, has not been overturned.
Powell said telecom regulation fit a model begun over 100 years ago, when "there was one wire" that had to be strung, often at great expense, to every home. But it dates back to an era in which specific platforms were optimized for one and only one application. "The PSTN [Public Switched Telephone Network] is probably the finest engineering experiment, for the single thing it does, that the U.S. has ever produced," he said.
But that era has been replaced, he said, by one in which a range of platforms perform a wide range of applications, with telephony just one of them. "The technology has disconnected the architecture from the application. Platforms can be application-agnostic. People dont get what a new paradigm that is," Powell said. In the absence of a monopoly, he sees no regulatory role beyond assuring equal access and issues relating to public safety, like 911.
Powell also positioned the hands-off policy as an indirect industry incubator, encouraging entrepreneurial developers to take risks freed from the added expense of legal filings. "I dont subsidize development. I dont have money to give, but I do incubate indirectly, by hacking away the underbrush. Why should I draw off capital for Washington law firms that could be spent on switches, routers and R&D?"
President Bush has announced a goal of universal broadband connectivity by 2007. Powell said he believes this is doable, if "[we] dont limit ourselves to considering only DSL and cable modems." He recommended qualifying WiMax and other broadband possibilities, including over power lines, as possible alternative means toward that goal.
Powell further said that those individual states that have taken an aggressive posture on regulating VOIP as a telecom service are making a mistake, since IP networks, like the railroads, are national and even global entities. He noted that these same states have been among the most aggressive in enforcing the 1996 Telecom Act provisions that force incumbent carriers to open their traditional network platforms to new entrants. Powell added that the inconsistency suggests that this issue is not about regulation, "but about power," noting that it was only the regulatory avenues of competition that the states supported.
Rowland Curry, an Austin, Texas-based telecom policy consultant to state public service commissions and consumer groups, noted in a private interview that it is also very much about money: The states have $20 billion a year at stake in the telecom Universal Service Fund and other fees, a sum they are loathe to lose to VOIP.