High Tech Policy Guide - Deregulation

Deregulation Deregulation

The explosive growth of the Internet is driving a new era of communications marked by the convergence of data, voice and video technologies. As "new world" data technologies enable the seamless integration of legacy voice technologies, governments must refrain from applying conventional rules and regulations. For example, voice transmissions can now be made over the Internet - so-called "VoIP" or voice over internet protocol. If existing, restrictive rules for traditional voice telephony are applied to this new technology, we would see a slowing effect on the growth of broadband.

Impact to Business
The one thing that investors and markets need is certainty. If it is unclear whether there will or will not be regulatory action in a specific area, it could slow investment and activity to a standstill.

Regulation slows technological development, hinders growth of new industries, and directly impacts revenue by drawing resources away from revenue generating activities to implementation of new regulatory barriers. New technologies, such as voice over internet protocol (VoIP), can represent profitable new industries.


In the United States, the issue is largely whether VoIP (or some types of VoIP) should be as highly regulated as telecommunication services or left largely unregulated as information services. If treated as a telecommunications service, VoIP services will be liable for regulatory charges such as access charges and universal service subsidies as well as compliance with regulations governing E911 emergency services, lawful intercept under the Communications Assistance for Law Enforcement Act (CALEA) and access for people with disabilities. The Federal Communications Commission (FCC) has opened an omnibus proceeding on not only the regulatory treatment of VoIP but also of all IP-based services.

In the European Union (EU), there is a positive attitude towards "disruptive" technologies such as VoIP. Many of the recent policy papers, such as the report, "Rethinking the European ICT Agenda," highlight that a "timely acceptance and uptake of disruptive technologies is of enormous importance" and plead for a minimization of the barriers to allow for the introduction of VoIP. Additionally, the regulatory choices are not as stark since the categorizations do not carry the same implications as in the U.S. The main categories are "electronic communications services" and "publicly available telephony services." The current debate is focused on social requirements and numbering.

Regulators are analyzing to what extent new VoIP-enabled services will need to comply with the same social requirements as "publicly available telephony services" (e.g. access to emergency services, network integrity, access to disabled users, lawful intercept etc.) and what types of numbering resources should be allocated to VoIP.

VoIP-enabled services will only face economic regulation when they are found to be a substitute for traditional voice service, the market is not competitive and the provider has market power. Essentially, only incumbent providers face the potential of significant regulation if they offer VoIP as a substitute to traditional services.

Key Messages

As a general principle, government should avoid regulating information technology industries:

  • Where barriers to converging information technology exist, such as in the telecommunications industry, government should deregulate.
  • Burdensome regulations and barriers will limit new entrants, delay the introduction of new products and services to consumers, and stunt the overall growth of the Internet.
  • To ensure a robust global information infrastructure policymakers should adopt policies that:
  • embrace a "hands-off" approach to the Internet;
  • promote competition in telecommunications infrastructure by removing barriers to entry;
  • encourage innovation and investment in advanced technologies; and
  • let industry and market forces lead.


National Telecommunications and Information Agency (NTIA)
International Telecommunications Union (ITU) provides an excellent explanation of the issue and some useful links.

As of January 2005