Regulation and the ‘Net: Where we’re headed

I’ve said it before, but the pundits in the 1990s were right: Convergence changes everything. The vanishing distinction between voice and data has precipitated a massive overhaul of technical infrastructure, as IT executives, vendors and service providers are keenly aware.

Less obvious – but potentially even more far-reaching – is the resultant sea change in our legal and regulatory infrastructure. Make no mistake, over the next five years, entire industries will emerge or vanish because of these changes.

Here’s a sampling, and over the next few months we’ll revisit each in detail.

First and foremost is the question of access charges for IP telephony services. In a claim under review by the FCC, AT&T says it doesn’t owe access fees to terminating telcos on calls carried mostly over the Internet.

In a separate but related case, the FCC is reviewing whether peer-to-peer software companies such as Skype and Free World Dialup are considered telcos (and thus liable for access fees), or whether they’re online service providers such as AOL. Decisions on both cases are due this year.

What’s at stake is the future of telecommunications.

The FCC is widely expected to find against AT&T and in favor of the peer-to-peers. Such a decision is tantamount to imposing a multi-billion-dollar tax on owning or interconnecting to the public switched telephone network – and it spells curtains for the long-distance voice industry. (Ever notice how when you tax something there’s a lot less of it, especially when an equivalent is available tax-free?)

A second major issue has to do with the right to privacy. As voice becomes data and encryption proliferates, companies increasingly are encrypting traffic via Secure Sockets Layer and IP Security, and law enforcement agencies are demanding “digital wiretapping” capabilities. Essentially, to be sure of access to potential bad guys, decryption solutions need access to all traffic, which amounts to having a potential government wiretap in every switch or software application, waiting to be activated.

Whether you consider this a major issue depends on how much you trust the government. Personally, while I’ve seen government do a lot of good things, its track record on privacy is mixed at best. So while I recognize that law enforcement has a need to pursue suspected criminals, I’m leery of many of the initiatives.

Speaking of privacy, here’s an update on the file-swapping wars. You’ll recall that SBC, Verizon and other independent local exchange carriers (ILEC) successfully petitioned a federal appeals court to force the Recording Industry Association of America (RIAA) to obtain judicial approval for its subpoenas against illegal file sharing.

Well, the RIAA is doing just that, and this time, if the judges agree, the ILECs must comply. But take note that bands and their managers finally are waking up to the concept of cutting out the middleman and beginning to use the Internet to go directly to listeners. My prediction is the RIAA will win this battle but lose the war – and musicians will come out ahead in the end.