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Protecting the public from innovation

By Scott Bradner

The Minnesota Public Utilities Commission knows they know more than you do. They know what telephone service is and woe be you if your definition is different than theirs since they have the law on their side. They recently came to the conclusion that at least one voice over Internet service is actually a telephone service deserving of regulation rather than yet another information service running over the Internet. In case you did not know already, using the words "regulation" and "innovation" in the same sentence is a challenge.

It seems that someone at the Minnesota Department of Commerce saw an ad for Vonage, a voice over IP provider, thought it looked a lot like an ad from a telephone company and complained to the Minnesota Public Utilities Commission. Ostensibly, the Minnesota Department of Commerce was worried that Vonage did not do the right thing when it came to supporting 911 emergency calls. A spokes person for the Minnesota Department of Commerce was quoted as saying that Vonage should not be permitted to operate in Minnesota if their 911 implementation was not up to standards. And, by the way, Minnesota has a bunch of taxes that apply to phone services and the state is involved in setting the rates for phone services.

There are a number of intertwined issues here.

o 911 services depend on knowing where someone is. This is easy when there is a dedicated wire for the phone service, hard to impossible when someone can plug the phone into any Internet connection anywhere in the world.

o Even if Vonage were able to tell the emergency folk exactly where the caller is it would not be compatible with the emergency systems since they depend on receiving a phone number that they look up in a data base to find a street address.

o Vonage does not advertise that they provide 911 service (but they do seem to have some way to provide something like it) should they be required to provide something they do not advertise?

o When does a voice interaction application become a phone service -- is voice-enabled instant messaging a phone service that needs to support 911?

o How much of this is actually the regulators trying to protect the incumbent phone companies and the revenue streams from them?

When there was only one phone company in any one area there might have been a good reason for the regulators to define what services that phone company had to offer and at what price. But since the Internet enables an infinite number of companies and individuals to offer the equivalent of phone service in the same area is the regulation still needed to protect the consumer? Real competition between providers pushes innovation and lowers prices -- somehow I do not think it's likely that regulations from the Minnesota Public Utilities Commission will have the same effect.

Maybe Minnesota regulators should insist in truth in advertising, including requiring that the ads say if 911 is not provided, and let the customers decide what they want. That approach seems to work in many other areas.

disclaimer: I'm sure Harvard trains some regulators, I hope they are not as good at ignoring the interest of the consumers but the above is my observation.