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VoIP and P2P, the Telco Kryptonite

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No matter what the FCC decides Tuesday in its rules for the 700 MHz spectrum auctions, the political deck remains heavily stacked in favor of communications incumbents. Just ask anyone playing the the independent VoIP or the peer-to-peer worlds, two areas of innovation that are under constant attack from the entrenched powers that be, hampering any small chance they have of gaining critical mass.

So even if Google or longshot Frontline Wireless gains a foothold Tuesday, it’s still a long way to the actual auction of spectrum and even longer to the deployment of networks. Along the way, expect incumbents — mainly AT&T, Verizon and the cablecos — to use all their regulatory influence to inhibit innovative entrants, just like they are currently doing to VoIP and P2P.

There is no reason here to blame the telcos for their actions — if your company had buckets of ready cash and a well-established corps of lobbyists, your shareholders would expect no less. What communications innovators need are more deep-pocket lobbying efforts like the one underway at Google, to refute positions like FCC commissioner Robert McDowell’s faith-based entrepreneurialism, which ignores the fact that the FCC has been party to regulations (like the VoIP E911 requirements) that put a serious money hurt on VoIP players like Vonage.

This isn’t to say that upstarts like Vonage and SunRocket had business models that made sense; but if you are going to publicly proclaim that there shouldn’t be regulation of communications, then why aren’t wireless providers being held to the same E911 standards as VoIP? A “light touch” is certainly something defined differently by the eye of the beholder.

And now watch for telco-backed lawmakers to try to put similar regulatory hurdles in front of P2P providers, whose anarchist and de-centralized systems are currently the cause of many sleepless nights in the incumbent provider world. Funny how the don’t-regulate-the-Internet crowd of telco cheerleaders never seem to put their rhetorical skills to use arguing against VoIP or P2P regulation.

In his opinion piece in last week’s Wall Street Journal, McDowell waxes warmly about how history shows that when network pressures loom, “some brilliant entrepreneur finds a way to use the airwaves more efficiently.” What he’s leaving out is the fact that incumbent-backed regulation is sure to quickly follow, to help push those entrepreneurs toward the corporate graveyards that claimed early DSL providers, many CLECs, and now SunRocket and perhaps before long, Vonage.

McDowell ends his bit with the peace-and-love thought of “Belief in entrepreneurs and a light regulatory touch is the right broadband policy for America.” For VoIP and P2P providers — or anyone else challenging the incumbents — if it could only be so.

11 Responses to “VoIP and P2P, the Telco Kryptonite”

  1. Paul Tiseo

    @Kevin Walsh: “the best way to get Government to do your dirty work for your is to dress it up in positive words like “open” and “fair” and “neutral.””

    This assumes incumbents built their networks without the help of the Government, sometimes faintly remembered in the US as “We The People”.

  2. Jesse Kopelman

    “There is no reason here to blame the telcos for their actions — if your company had buckets of ready cash and a well-established corps of lobbyists, your shareholders would expect no less.”

    Hardly true. That money would be better spent building better networks or delivering a higher level of customer service. Just think of how many call center reps and service techs could be hired for the combined salaries of AT&T or Verizon’s lawyers and lobbyists!

  3. I agree that it is understandable that the incumbents want to keep their position of power. As a consumer, that still leaves me rooting for the new guys – since they are better for the small guy (consumer).

  4. Joaquin

    We’ll see what the FCC proposes. Let’s hope it’s not more smoke and mirrors like Martin’s moves over the recent past; pitching the media on the idea that he supports “open access . . ,” while suggesting rules that would enable the incumbents to get what they want. It’s been almost humorous (in a sick sort of way) to read articles about AT&T and Verizon’s “change of heart” regarding Martin’s recommendations for “open access” – as if there was anything truly threatening to them in Martin’s suggestions.

    Martin also set himself up to be able to claim, as a response to the Skype petition, that the FCC doesn’t have to change any of its current policies regarding wireless communications (i.e., doesn’t have to require true open access to the Internet, etc.), because a portion of the 700-megahertz spectrum will be dedicated to that purpose.

    Tate’s responses on the Hill (regarding the 700-megahertz spectrum) to questions about what may be the most important policy decisions of her tenure were particularly perplexing, “I don’t have an opinion on that issue . . . .”

    Let’s hope Tate has a well developed opinion fairly soon, and that Martin and McDowell propose something that is consistent with their professed fondness for openness, competition and innovation.

  5. Kevin Walsh

    Of course Google can lay fiber to the home. Or buy spectrum and then build and operate networks to use it. If they did they would then become an incumbent and would find themselves doing the same things other incumbents do (or any business or individual does for that matter)—try to maximize the value of what they’ve built.

    If you’re a non-incumbent (as Google is today), then your objectives are different. You want Government to force incumbents to let you use their networks at little or no cost. And the best way to get Government to do your dirty work for your is to dress it up in positive words like “open” and “fair” and “neutral.”