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The Two Faces of U.S. Telecommunication Law

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by , 09-04-2012 at 08:44 AM (1120 Views)
The Telecommunications Act of 1996 is the last major change to U.S. telecommunication law since 1934. The Act sought to promote competition among businesses using the same telecommunications infrastructure and operating within the same market. Instead, the Act opened the doors to intermodal competition in which companies using one technology infrastructure, such as VoIP, began to compete in a market dominated by another infrastructure such as wired telephony. As industry lines blurred, the Actís segregation of services led to financial consequences.

Telecommunications services vs. information services

The Act distinguishes between telecommunications services and information services and sets forth different obligations for each. As companies now offer services spanning both definitions, this separation has caused issues. Telecommunications services are defined as those offered to the general public for a fee. Information services refer to providing information over a telecommunications infrastructure. For example, the sale of broadband DSL internet access is classified as an information service even though it relies on infrastructure used for traditional telephony.

The Actís distinction now seems outdated given the convergence of information services and telecommunications. Today, a single provider may offer voice, video, and internet services over cable. Part of the providerís business is subject to telecommunication regulations and another part to information services regulations.

Even in the 1990s, industry was developing technology to make broadband the new telecommunications infrastructure. However, the pioneering technology generated little buzz and captured even less market share. As far as the public was concerned, the day of the integrated solution had not yet arrived. It is not surprising that the Act did not foresee the merger of traditional telecommunications and information services.

Financial fallout

One of the Actís provisions was to mandate that telecommunications providers contribute funds toward universal access to their services. The FCC created the Federal Universal Service Fund in 1997 and assesses providers a percentage of their projected quarterly earnings. The funds are distributed to designated recipients such as rural healthcare providers, high-cost and low-income regions, and schools and libraries.

Companies whose services are classified under information services do not have to pay the Federal Universal Service Fund surcharge. Though in fact the firms may be providing telecommunications services, the Act excludes them from obligation. Potentially, millions of dollars in excluded revenue are being left on the table and out of the most needy areas of the U.S.

FCC policy shakeup

By 2006, policy began to shift when the FCC expanded universal service payment requirements to include VoIP providers regardless of which infrastructure they used. In 2008, the FCC added stand-alone audio bridging and integrated teleconferencing service providers to the list of contributors.

VoIP services still remained unclassified with respect to the Act, meaning that the FCC had applied a portion of the law to an undefined service. In 2010, a federal appeals court ruled against the FCC on the grounds that it did not have the authority to impose universal service payments on an internet service provider. The ruling has sparked talk in Washington, but no significant legislation has been passed. On its part, the FCC has upheld its original stance in the face of its own controversial reclassification efforts.

Lawmakers, industry, and the public all agree that telecommunication law needs major reforms to bring it into the Internet age. As companies continue their intermodal expansion, the public needs to engage with the issue and help craft policy.