By Paul Feldman

The U.S. Court of Appeals for the D.C. Circuit today upheld a 2006 FCC Order requiring interconnected Voice-over-the-Internet ("VOIP") providers to contribute to the federal universal service fund ("USF"). The Court’s action continues the momentum over the last few years to regulate core aspects of VOIP in a manner similar to traditional telecommunications carriers. Consistent with that momentum, yesterday the FCC announced an Order under which it imposed an obligation on interconnected VOIP providers to contribute to the Telecommunications Relay Service ("TRS"), and a notice of proposed rulemaking seeking comments on its tentative conclusion that providers of interconnected VOIP that allows the subscriber to "roam" to different locations must employ automatic location technology that meets the same accuracy standards as those imposed on wireless carriers, in connection with the provision of E911 emergency service.

All of this comes down to one indubitable truth: if it walks like a duck, if it quacks like a duck, then REGULATE it like a duck! Six years ago, when VOIP started to take off with the masses, and regulators started to look at the impact, the VOIP providers came in to regulatory proceedings trying to look like the smartest guys in town, claiming that VOIP should not be subject to those nasty "legacy" telephone regulations, because anyone with a brain could see that voice service was just an "application" and VOIP was something much bigger and radically different than traditional telephony. Well, Michael Powell bought that, hook-line-and-sinker, but in a few years the real truth came out: people get VOIP to make telephone calls – no more and no less. Yeah, with VOIP you can check your voice messages by e-mail, but so what! People get VOIP to make cheap calls to their niece in London. Period. The FCC finally caught on to this, and when they looked around, they saw that use of VOIP is rapidly replacing use of traditional telephone and greatly speeding up the impending crash of the current USF and intercarrier compensation regimes. Not wanting to preside over the next telecom crash, the FCC started to impose that nasty "legacy" telephone regulation on VOIPers.

The VOIP providers had high hopes six years ago that they could come into the market and provide voice services without any of the burden of "legacy" regulations imposed on their traditional carrier competitors. Those hopes appear to be long gone at this point, with only the question of access charges undecided. If the FCC imposes that requirement on VOIP operators (as it appears likely to do if it ever acts in the intercarrier compensation proceeding), then the VOIP operators will have to see if they can succeed in the marketplace without regulatory advantages over traditional carriers. They’ll have to swim fast and compete for customer-fishes, just like the other ducks.