U.S. Internet Regulations Will Spur Collateral Damage

The recent decision by the Federal Communications Commission to regulate the Internet as a utility telephone service under Title II of the Communications Act ends a policy responsible for the success of the commercial Internet over the last 20 years in the name of “protecting an open Internet.” The decision represents certain trouble for entrepreneurial initiatives in communication given the 80 year anti-innovation track record of the FCC implementation of Title II authority.

The arrival of public utility regulations for the Internet is why I joined the Tech Innovator group – a collection of normally reluctant activist friends who convened with the goal of restoring Internet independence. There is an urgent need to preserve the policy environment responsible for the remarkable expansion of communication capacity after the April 30, 1995 granting of Internet independence.

As my fellow Tech Innovator Daniel Berninger has pointed out many times, including twice in the form of a petition to stay the FCC rules, retrofitting broad regulations to negate market abuses that have never been committed in the first place does far more harm than good. And this harm extends well beyond the inability for Internet behemoths to now experiment with new business ventures or invest in network expansions and upgrades. The tentacles of Internet regulations, like in any industry, will produce collateral damage and hamper innovation across the Internet marketplace.

I come to this conviction through direct experience with hurdles and financial burdens associated with telephone regulations.

In 1995, when I was preparing my first venture into VoIP service, also known as Internet telephony, most experts claimed that the same Title II rules of 1934 now set to govern the web would prevent the development of Internet based phone services like Vonage. Those experts rightfully feared that subjecting modern Internet based services to deadening rate regulations and other anachronistic rules would deaden growth in that market.

For the next decade, this legal uncertainty, now a widespread reality as a result of the new FCC rules that took effect June 12, was the single greatest impediment to innovation. Investors stayed away, fearing that the FCC could regulate to force conformity and stop new startups from using the Internet to avoid copper telephone lines.

In 2003, I asked the FCC to stand up for innovators by putting an end to the legal uncertainty that was scaring off investors in droves. The next year, in what was to become known as the “Pulver Order,” the FCC declared that Internet supported phones were in fact an information service, just as the rest of the Internet was until today. If looking for proof-positive that this was a good decision, look no further than your next FaceTime or Skype call, a direct byproduct and reality of that FCC decision.

The truth is, utility-style rules are not the only way to ensure that ISPs won’t block Internet sites or create so-called “fast lanes.” Not only are supporters of these rules wrong to think that utility-style regulation is the only way to ban discrimination – which I would argue doesn’t exist –  but they also completely fail to understand the collateral damage that would be caused by flipping our current model to Title II rules.

But how we got here is now beside the point. A solution is needed in short order to deter collateral damage and ensure policy is put in place to help the Internet advance just as much over the next twenty years as it has since its privatization in 1995. To the extent new rules are required, I believe the country will be much better served by allowing Commerce Committee’s in Congress to act than relying on an FCC reinterpretation of a 1934 law that predates the transistor.

We should do everything to protect the future of the Internet; no one argues with that. But putting it under the rule of laws created under FDR defies logic. The federal government is doing the American public a disservice if it insists that the only way to create fairness is to freeze the Internet in place for the rest of time.

I encourage all of my entrepreneur peers to speak up and say enough is enough before it is too late.


Jeff Pulver is the founder of Free World Dialup(FWD), the VON Coalition, Vivox and is the co-founder of Vonage and Zula. He is also a member of the Tech Innovators.

Morning Consult